"Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn't by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today's darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn't attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal," said Vilas Fund in its Q1 investor letter. We aren't sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards RF Industries, Ltd. (NASDAQ:RFIL).
Hedge fund interest in RF Industries, Ltd. (NASDAQ:RFIL) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as RumbleOn, Inc. (NASDAQ:RMBL), Global Eagle Entertainment Inc. (NASDAQ:ENT), and Volt Information Sciences, Inc. (NYSE:VOLT) to gather more data points. Our calculations also showed that RFIL isn't among the 30 most popular stocks among hedge funds.
In today’s marketplace there are a multitude of tools investors can use to value publicly traded companies. Some of the most under-the-radar tools are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the best picks of the elite fund managers can outpace their index-focused peers by a superb amount (see the details here).
[caption id="attachment_26255" align="aligncenter" width="450"] Louis Navellier of Navellier & Associates[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to check out the recent hedge fund action regarding RF Industries, Ltd. (NASDAQ:RFIL).
What does smart money think about RF Industries, Ltd. (NASDAQ:RFIL)?
At Q3's end, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RFIL over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in RF Industries, Ltd. (NASDAQ:RFIL), which was worth $5.1 million at the end of the third quarter. On the second spot was G2 Investment Partners Management which amassed $0.8 million worth of shares. Navellier & Associates was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position G2 Investment Partners Management allocated the biggest weight to RF Industries, Ltd. (NASDAQ:RFIL), around 0.23% of its portfolio. Navellier & Associates is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to RFIL.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as RF Industries, Ltd. (NASDAQ:RFIL) but similarly valued. These stocks are RumbleOn, Inc. (NASDAQ:RMBL), Global Eagle Entertainment Inc. (NASDAQ:ENT), Volt Information Sciences, Inc. (NYSE:VOLT), and Mastech Digital, Inc. (NYSE:MHH). This group of stocks' market valuations resemble RFIL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RMBL,6,7023,0 ENT,7,23371,0 VOLT,5,5093,0 MHH,1,306,0 Average,4.75,8948,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $6 million in RFIL's case. Global Eagle Entertainment Inc. (NASDAQ:ENT) is the most popular stock in this table. On the other hand Mastech Digital, Inc. (NYSE:MHH) is the least popular one with only 1 bullish hedge fund positions. RF Industries, Ltd. (NASDAQ:RFIL) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately RFIL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); RFIL investors were disappointed as the stock returned -16.4% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.