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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Ranpak Holdings Corp (NYSE:PACK)? The smart money sentiment can provide an answer to this question.
Ranpak Holdings Corp (NYSE:PACK) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 14 hedge funds' portfolios at the end of September. Our calculations also showed that PACK 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 PACK to other stocks including Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS), Scholastic Corp (NASDAQ:SCHL), and GoPro Inc (NASDAQ:GPRO) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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.
Brad Gerstner of Altimeter Capital
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 15 best blue chip stocks 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. With all of this in mind we're going to take a peek at the new hedge fund action encompassing Ranpak Holdings Corp (NYSE:PACK).
Do Hedge Funds Think PACK Is A Good Stock To Buy Now?
At third quarter's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. By comparison, 14 hedge funds held shares or bullish call options in PACK a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ranpak Holdings Corp (NYSE:PACK) was held by JS Capital, which reported holding $285.4 million worth of stock at the end of September. It was followed by Altimeter Capital Management with a $9.5 million position. Other investors bullish on the company included Ulysses Management, Discovery Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position JS Capital allocated the biggest weight to Ranpak Holdings Corp (NYSE:PACK), around 14.75% of its 13F portfolio. Discovery Capital Management is also relatively very bullish on the stock, dishing out 0.94 percent of its 13F equity portfolio to PACK.
Due to the fact that Ranpak Holdings Corp (NYSE:PACK) has faced falling interest from the entirety of the hedge funds we track, it's easy to see that there were a few hedge funds who sold off their full holdings last quarter. Interestingly, Jonathan Soros's JS Capital said goodbye to the largest investment of the 750 funds tracked by Insider Monkey, worth close to $26.2 million in stock, and Christopher Shackelton and Adam Gray's Coliseum Capital was right behind this move, as the fund dumped about $13.6 million worth. These moves are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to Ranpak Holdings Corp (NYSE:PACK). These stocks are Controladora Vuela Compañía de Aviación, S.A.B. de C.V. (NYSE:VLRS), Scholastic Corp (NASDAQ:SCHL), GoPro Inc (NASDAQ:GPRO), Enterprise Financial Services Corp (NASDAQ:EFSC), Partner Communications Company Ltd (NASDAQ:PTNR), ChipMOS Technologies Inc (NASDAQ:IMOS), and CTS Corporation (NYSE:CTS). This group of stocks' market caps are closest to PACK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VLRS,9,75839,0 SCHL,14,40578,1 GPRO,14,292314,4 EFSC,14,26549,0 PTNR,1,10510,0 IMOS,2,32720,0 CTS,11,57396,-3 Average,9.3,76558,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.3 hedge funds with bullish positions and the average amount invested in these stocks was $77 million. That figure was $318 million in PACK's case. Scholastic Corp (NASDAQ:SCHL) is the most popular stock in this table. On the other hand Partner Communications Company Ltd (NASDAQ:PTNR) is the least popular one with only 1 bullish hedge fund positions. Ranpak Holdings Corp (NYSE:PACK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for PACK is 79.7. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on PACK as the stock returned 24.6% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
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