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Is RingCentral Inc (RNG) A Good Stock To Buy?

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·5 min read
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In this article you are going to find out whether hedge funds think RingCentral Inc (NYSE:RNG) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is RNG a good stock to buy now? RingCentral Inc (NYSE:RNG) has experienced an increase in hedge fund interest recently. RingCentral Inc (NYSE:RNG) was in 48 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 67. Our calculations also showed that RNG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let's go over the new hedge fund action encompassing RingCentral Inc (NYSE:RNG).

Xiniya Earnings Call Transcript XNY 2014 Q3
Xiniya Earnings Call Transcript XNY 2014 Q3

New York Stock Exchange

Do Hedge Funds Think RNG Is A Good Stock To Buy Now?

At the end of September, a total of 48 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RNG over the last 25 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Chase Coleman's Tiger Global Management LLC has the biggest position in RingCentral Inc (NYSE:RNG), worth close to $859.8 million, amounting to 1.7% of its total 13F portfolio. The second largest stake is held by Panayotis Takis Sparaggis of Alkeon Capital Management, with a $783.6 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass Christopher Lyle's SCGE Management, Gaurav Kapadia's XN Exponent Advisors and Panayotis Takis Sparaggis's Alkeon Capital Management. In terms of the portfolio weights assigned to each position Cota Capital allocated the biggest weight to RingCentral Inc (NYSE:RNG), around 6.45% of its 13F portfolio. XN Exponent Advisors is also relatively very bullish on the stock, dishing out 5.33 percent of its 13F equity portfolio to RNG.

Now, some big names were leading the bulls' herd. XN Exponent Advisors, managed by Gaurav Kapadia, established the largest position in RingCentral Inc (NYSE:RNG). XN Exponent Advisors had $111.3 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $78.2 million investment in the stock during the quarter. The following funds were also among the new RNG investors: Renaissance Technologies, Panayotis Takis Sparaggis's Alkeon Capital Management, and Daniel Patrick Gibson's Sylebra Capital Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as RingCentral Inc (NYSE:RNG) but similarly valued. These stocks are Darden Restaurants, Inc. (NYSE:DRI), ON Semiconductor Corporation (NASDAQ:ON), Cheniere Energy Partners LP (NYSE:CQP), Ulta Beauty, Inc. (NASDAQ:ULTA), Trip.com Group Limited (NASDAQ:TCOM), Insulet Corporation (NASDAQ:PODD), and AMC Entertainment Holdings Inc (NYSE:AMC). This group of stocks' market values resemble RNG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DRI,25,337086,-19 ON,41,1251738,-3 CQP,3,10790,1 ULTA,42,935547,2 TCOM,36,1794035,-5 PODD,32,1318310,-6 AMC,17,252354,-4 Average,28,842837,-4.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $843 million. That figure was $2905 million in RNG's case. Ulta Beauty, Inc. (NASDAQ:ULTA) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks RingCentral Inc (NYSE:RNG) is more popular among hedge funds. Our overall hedge fund sentiment score for RNG is 77.5. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately RNG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on RNG were disappointed as the stock returned -0.7% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.