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Is Rush Street Interactive, Inc. (RSI) A Good Stock To Buy?

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of March 31st. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Rush Street Interactive, Inc. (NYSE:RSI).

Is RSI a good stock to buy? Rush Street Interactive, Inc. (NYSE:RSI) has experienced a decrease in hedge fund interest lately. Rush Street Interactive, Inc. (NYSE:RSI) was in 17 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 26. There were 26 hedge funds in our database with RSI positions at the end of the fourth quarter. Our calculations also showed that RSI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the eyes of most stock holders, hedge funds are perceived as unimportant, outdated financial tools of years past. While there are over 8000 funds in operation at present, Our researchers hone in on the elite of this group, about 850 funds. It is estimated that this group of investors shepherd the lion's share of the smart money's total capital, and by shadowing their inimitable picks, Insider Monkey has uncovered a few investment strategies that have historically outstripped the S&P 500 index. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Josh Friedman Canyon Capital
Josh Friedman Canyon Capital

Joshua Friedman of Canyon Capital Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Keeping this in mind let's take a look at the key hedge fund action surrounding Rush Street Interactive, Inc. (NYSE:RSI).

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

At Q1's end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -35% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in RSI a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Rush Street Interactive, Inc. (NYSE:RSI) was held by Balyasny Asset Management, which reported holding $35.2 million worth of stock at the end of December. It was followed by Shelter Haven Capital Management with a $34 million position. Other investors bullish on the company included Canyon Capital Advisors, Becker Drapkin Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to Rush Street Interactive, Inc. (NYSE:RSI), around 10.72% of its 13F portfolio. 1060 Capital Management is also relatively very bullish on the stock, designating 2.19 percent of its 13F equity portfolio to RSI.

Seeing as Rush Street Interactive, Inc. (NYSE:RSI) has faced falling interest from the smart money, it's easy to see that there exists a select few fund managers that elected to cut their entire stakes in the first quarter. Intriguingly, Gavin Baker's Atreides Management said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, comprising about $21.7 million in stock, and Michael Platt and William Reeves's BlueCrest Capital Mgmt. was right behind this move, as the fund said goodbye to about $17 million worth. These transactions are interesting, as total hedge fund interest dropped by 9 funds in the first quarter.

Let's check out hedge fund activity in other stocks similar to Rush Street Interactive, Inc. (NYSE:RSI). These stocks are LiveRamp Holdings, Inc. (NYSE:RAMP), First Majestic Silver Corp (NYSE:AG), White Mountains Insurance Group Ltd (NYSE:WTM), Intercorp Financial Services Inc. (NYSE:IFS), Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Meritage Homes Corp (NYSE:MTH), and iRobot Corporation (NASDAQ:IRBT). This group of stocks' market valuations resemble RSI's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RAMP,26,300365,2 AG,15,54788,3 WTM,19,304951,3 IFS,5,35452,-1 APLS,34,696117,-1 MTH,23,335864,-7 IRBT,17,148076,-5 Average,19.9,267945,-0.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.9 hedge funds with bullish positions and the average amount invested in these stocks was $268 million. That figure was $116 million in RSI's case. Apellis Pharmaceuticals, Inc. (NASDAQ:APLS) is the most popular stock in this table. On the other hand Intercorp Financial Services Inc. (NYSE:IFS) is the least popular one with only 5 bullish hedge fund positions. Rush Street Interactive, Inc. (NYSE:RSI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RSI is 36.3. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately RSI wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); RSI investors were disappointed as the stock returned -40.6% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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