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Is RingCentral (RNG) Stock A Buy or Sell?

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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards RingCentral Inc (NYSE:RNG) changed recently.

Is RNG stock a buy or sell? RingCentral Inc (NYSE:RNG) has seen an increase in hedge fund sentiment recently. RingCentral Inc (NYSE:RNG) was in 63 hedge funds' portfolios at the end of December. The all time high for this statistic is 67. There were 59 hedge funds in our database with RNG positions at the end of the third quarter. Our calculations also showed that RNG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chase Coleman of Tiger Global

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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. 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 homepage (or at the end of this article). Keeping this in mind we're going to analyze the fresh hedge fund action surrounding RingCentral Inc (NYSE:RNG).

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

At the end of December, a total of 63 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards RNG over the last 22 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.

The largest stake in RingCentral Inc (NYSE:RNG) was held by Alkeon Capital Management, which reported holding $1327.2 million worth of stock at the end of December. It was followed by Tiger Global Management LLC with a $1260.6 million position. Other investors bullish on the company included SCGE Management, Zevenbergen Capital Investments, and SQN Investors. In terms of the portfolio weights assigned to each position Jeneq Management allocated the biggest weight to RingCentral Inc (NYSE:RNG), around 8.21% of its 13F portfolio. SQN Investors is also relatively very bullish on the stock, earmarking 8.19 percent of its 13F equity portfolio to RNG.

As industrywide interest jumped, key money managers were leading the bulls' herd. Black-and-White Capital, managed by Seth Wunder, initiated the biggest position in RingCentral Inc (NYSE:RNG). Black-and-White Capital had $39.7 million invested in the company at the end of the quarter. Suraj Parkash Chopra's Force Hill Capital Management also initiated a $21.7 million position during the quarter. The other funds with brand new RNG positions are Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, Nicolas Boullet's First Growth Capital Management, and Brian Ashford-Russell and Tim Woolley's Polar Capital.

Let's now take a look at hedge fund activity in other stocks similar to RingCentral Inc (NYSE:RNG). These stocks are Verisk Analytics, Inc. (NASDAQ:VRSK), Johnson Controls International plc (NYSE:JCI), TransDigm Group Incorporated (NYSE:TDG), Cummins Inc. (NYSE:CMI), Paychex, Inc. (NASDAQ:PAYX), STMicroelectronics N.V. (NYSE:STM), and CRH PLC (NYSE:CRH). This group of stocks' market caps resemble RNG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VRSK,32,1438418,-8 JCI,34,795050,10 TDG,64,6891017,0 CMI,45,828914,-4 PAYX,32,910613,4 STM,17,142352,-4 CRH,7,100951,0 Average,33,1586759,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1587 million. That figure was $4401 million in RNG's case. TransDigm Group Incorporated (NYSE:TDG) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 7 bullish hedge fund positions. RingCentral Inc (NYSE:RNG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RNG is 86.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately RNG wasn't nearly as popular as these 30 stocks and hedge funds that were betting on RNG were disappointed as the stock returned -16.3% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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