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Is ROIC A Good Stock To Buy Now?

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Asma UL Husna
·5 min read
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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Retail Opportunity Investments Corp (NASDAQ:ROIC) in this article.

Is ROIC a good stock to buy now? Retail Opportunity Investments Corp (NASDAQ:ROIC) was in 19 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 21. ROIC investors should be aware of a decrease in hedge fund sentiment of late. There were 20 hedge funds in our database with ROIC positions at the end of the second quarter. Our calculations also showed that ROIC 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are tons of gauges investors can use to assess their stock investments. Some of the less utilized gauges are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the top fund managers can trounce the S&P 500 by a healthy margin (see the details here).

Michael Burry Scion Capital
Michael Burry Scion Capital

Michael Burry of Scion Asset Management

With all of this in mind let's take a gander at the fresh hedge fund action regarding Retail Opportunity Investments Corp (NASDAQ:ROIC).

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

At Q3's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ROIC 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.

Among these funds, Waterfront Capital Partners held the most valuable stake in Retail Opportunity Investments Corp (NASDAQ:ROIC), which was worth $10.5 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $7.4 million worth of shares. D E Shaw, Two Sigma Advisors, and Scion Asset Management were 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 Waterfront Capital Partners allocated the biggest weight to Retail Opportunity Investments Corp (NASDAQ:ROIC), around 1.69% of its 13F portfolio. Scion Asset Management is also relatively very bullish on the stock, earmarking 1.58 percent of its 13F equity portfolio to ROIC.

Due to the fact that Retail Opportunity Investments Corp (NASDAQ:ROIC) has experienced falling interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few fund managers that decided to sell off their positions entirely in the third quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, valued at close to $2.1 million in stock, and Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors was right behind this move, as the fund cut about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Retail Opportunity Investments Corp (NASDAQ:ROIC) but similarly valued. We will take a look at Talend S.A. (NASDAQ:TLND), Astec Industries, Inc. (NASDAQ:ASTE), Zuora, Inc. (NYSE:ZUO), Phreesia, Inc. (NYSE:PHR), Model N Inc (NYSE:MODN), TTM Technologies, Inc. (NASDAQ:TTMI), and Luminex Corporation (NASDAQ:LMNX). All of these stocks' market caps resemble ROIC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TLND,28,587292,0 ASTE,15,99097,5 ZUO,23,130724,2 PHR,22,126830,2 MODN,22,144636,4 TTMI,20,124165,2 LMNX,29,234236,2 Average,22.7,206711,2.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.7 hedge funds with bullish positions and the average amount invested in these stocks was $207 million. That figure was $54 million in ROIC's case. Luminex Corporation (NASDAQ:LMNX) is the most popular stock in this table. On the other hand Astec Industries, Inc. (NASDAQ:ASTE) is the least popular one with only 15 bullish hedge fund positions. Retail Opportunity Investments Corp (NASDAQ:ROIC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ROIC is 45.4. 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 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on ROIC as the stock returned 28.5% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.

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

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