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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards RF Industries, Ltd. (NASDAQ:RFIL).
RF Industries, Ltd. (NASDAQ:RFIL) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 3 hedge funds' portfolios at the end of September. Our calculations also showed that RFIL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare RFIL to other stocks including Forward Pharma A/S (NASDAQ:FWP), ClearOne Inc (NASDAQ:CLRO), and Mid-Southern Bancorp, Inc. (NASDAQ:MSVB) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Jim Simons founder of Renaissance Technologies
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to view the new hedge fund action regarding RF Industries, Ltd. (NASDAQ:RFIL).
How are hedge funds trading RF Industries, Ltd. (NASDAQ:RFIL)?
At the end of September, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in 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 21 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the most valuable position in RF Industries, Ltd. (NASDAQ:RFIL). Renaissance Technologies has a $3.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is G2 Investment Partners Management, managed by Josh Goldberg, which holds a $0.4 million position; 0.1% of its 13F portfolio is allocated to 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 0.1% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0033 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 now take a look at hedge fund activity in other stocks - not necessarily in the same industry as RF Industries, Ltd. (NASDAQ:RFIL) but similarly valued. These stocks are Forward Pharma A/S (NASDAQ:FWP), ClearOne Inc (NASDAQ:CLRO), Mid-Southern Bancorp, Inc. (NASDAQ:MSVB), Bank of the James Financial Group, Inc. (NASDAQ:BOTJ), WidePoint Corporation (NYSE:WYY), CSI Compressco LP (NASDAQ:CCLP), and Ampco-Pittsburgh Corp. (NYSE:AP). This group of stocks' market caps match RFIL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FWP,2,4237,0 CLRO,2,1632,1 MSVB,4,5110,0 BOTJ,1,3979,0 WYY,3,1807,1 CCLP,2,952,0 AP,5,10752,2 Average,2.7,4067,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 2.7 hedge funds with bullish positions and the average amount invested in these stocks was $4 million. That figure was $4 million in RFIL's case. Ampco-Pittsburgh Corp. (NYSE:AP) is the most popular stock in this table. On the other hand Bank of the James Financial Group, Inc. (NASDAQ:BOTJ) is the least popular one with only 1 bullish hedge fund positions. RF Industries, Ltd. (NASDAQ:RFIL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RFIL is 45. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and beat the market again by 15.4 percentage points. Unfortunately RFIL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on RFIL were disappointed as the stock returned 2.9% since the end of September (through 11/23) 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 many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.