【can you combine sourdough starters】Were Hedge Funds Wrong About Crowding Into RealPage, Inc. (RP)?

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In this can you combine sourdough startersarticle we are going to use hedge fund sentiment as a tool and determine whether RealPage, Inc. (NASDAQ:

) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

【can you combine sourdough starters】Were Hedge Funds Wrong About Crowding Into RealPage, Inc. (RP)?

RealPage, Inc. (NASDAQ:

)

a bargain? Money managers were turning bullish. The number of bullish hedge fund positions went up by 10 lately. RealPage, Inc. (NASDAQ:

) was in 39 hedge funds' portfolios at the end of June. The all time high for this statistics is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RP isn't among the

30 most popular stocks among hedge funds

(click for Q2 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this

emerging lithium stock

. We go through lists like the 10

most profitable companies

in the world 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

to get excerpts of these letters in your inbox. With all of this in mind we're going to take a gander at the recent hedge fund action regarding RealPage, Inc. (NASDAQ:

Story continues

How are hedge funds trading RealPage, Inc. (NASDAQ:RP)?

At Q2's end, a total of 39 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 34% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in RP over the last 20 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is RP A Good Stock To Buy?

More specifically,

Eminence Capital

was the largest shareholder of RealPage, Inc. (NASDAQ:RP), with a stake worth $210.5 million reported as of the end of June. Trailing Eminence Capital was Stockbridge Partners, which amassed a stake valued at $157.2 million. Echo Street Capital Management, Citadel Investment Group, and RGM Capital 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

Banbury Partners

allocated the biggest weight to RealPage, Inc. (NASDAQ:RP), around 8.07% of its 13F portfolio. Stockbridge Partners is also relatively very bullish on the stock, designating 4.93 percent of its 13F equity portfolio to RP.

As one would reasonably expect, some big names have jumped into RealPage, Inc. (NASDAQ:RP) headfirst. Millennium Management, managed by Israel Englander, established the most valuable position in RealPage, Inc. (NASDAQ:RP). Millennium Management had $13.5 million invested in the company at the end of the quarter. Doug Silverman and Alexander Klabin's

Senator Investment Group

also made a $5.2 million investment in the stock during the quarter. The following funds were also among the new RP investors: Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, and Matthew L Pinz's

Pinz Capital

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as RealPage, Inc. (NASDAQ:RP) but similarly valued. These stocks are Commerce Bancshares, Inc. (NASDAQ:

CBSH

), Dolby Laboratories, Inc. (NYSE:

DLB

), UGI Corp (NYSE:

UGI

), Diamondback Energy Inc (NASDAQ:

FANG

), Carlisle Companies, Inc. (NYSE:

CSL

), The Boston Beer Company Inc (NYSE:

SAM

), and Lear Corporation (NYSE:

LEA

). All of these stocks' market caps are closest to RP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CBSH,16,52750,1 DLB,28,489505,-1 UGI,26,220118,-1 FANG,29,105362,-2 CSL,38,339108,15 SAM,32,804033,8 LEA,41,896134,13 Average,30,415287,4.7 [/table]

View table here

if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $415 million. That figure was $740 million in RP's case. Lear Corporation (NYSE:

LEA

) is the most popular stock in this table. On the other hand Commerce Bancshares, Inc. (NASDAQ:

CBSH

) is the least popular one with only 16 bullish hedge fund positions. RealPage, Inc. (NASDAQ:RP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RP is 86. 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 10 most popular stocks

among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and beat the market again by 20.1 percentage points. Unfortunately RP wasn't nearly as popular as these 10 stocks and hedge funds that were betting on RP were disappointed as the stock returned -14.3% since the end of June (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the

top 10 most popular stocks

among hedge funds as many of these stocks already outperformed the market so far this year.

Get real-time email alerts: Follow Realpage Inc. (NASDAQ:RP)

Disclosure: None. This article was originally published at

Insider Monkey

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上一篇：5%, led by a 17% increase in average ticket and a slight decline in traffic. Growth in the quarter reflected the impact of households stocking up on essentials like paper goods and cleaning supplies as the pandemic became a nationwide concern, along with strength in discretionary categories as the quarter came to a close and stimulus dollars and tax refunds were disbursed.

As shown below, the results in the quarter materially changed the trend in two-year stacked comps for each of the banners, along with a significant acceleration for consolidated comps.

The increase in consolidated comps was the primary driver of an 8% increase in revenues to $6.3 billion. The company ended the quarter with 15,370 locations, up less than 1% year-over-year. This reflects a 7% increase in Dollar Tree units, offset by a 4% decline in Family Dollar units.

The top-line results at each banner flowed through to their respective income statements, with Dollar Tree gross margins and operating margins declining year-over-year while Family Dollar gross margins and operating margins expanded year-over-year. On a consolidated basis, gross margins contracted by 120 basis points in the quarter to 28.5%, reflective of a shift to lower-margin consumables, tariff costs and the impact of markdowns from the Easter headwinds at the Dollar Tree banner. The company saw slight operating leverage on SG&A from higher comps, with the net result being an 80 basis point contraction in operating margins to 5.8%, with operating income declining 5% to $366 million. This is not adjusted for $73 million of pandemic-related costs, such as PPE supplies.

In the first quarter, the company opened 85 stores (net of closures) and completed 220 Family Dollar renovations to the H2 format. Importantly, comps at renovated Family Dollar stores continue to outpace the chain average by more than 10%. On the call, management indicated that they plan on reducing both the number of new store openings (from 550 to 500) and the number of H2 renovations (from 1,250 to 750) in 2020.

Personally, given the fact that Family Dollar is seeing material benefits to its business from the pandemic with new or lapsed customers coming into its stores, I think the company should try to get more aggressive with its renovation plans, not less. On the other hand, you could argue that renovations cause short-term disruptions and limit their ability to fully capitalize on the business momentum they are currently experiencing.

As a result of fewer new stores and remodels, management now expects 2020 capital expenditures to total $1.0 billion compared to previous guidance of $1.2 billion. In addition, the company has temporarily suspended share repurchases. At quarter's end, the company had $1.8 billion in cash on its balance sheet compared to $4.3 billion in total debt.

Conclusion

In recent years, Dollar Tree has been a tale of two cities. While its namesake banner has generally delivered impressive financial results, Family Dollar has been a persistent underperformer. This quarter, those results flipped, and given what we've seen in the weeks since quarter's end, there's a decent possibility that we will see something similar in the coming months. As the CEO noted, the second quarter is off to a very good start at Family Dollar.

Here's the important question: how useful is that information is in terms of making future predictions about the business? Will recent success at Family Dollar translate into long-term success for the banner? The optimistic take is that new or lapsed customers, especially those visiting the renovated stores, could become recurring business for the banner. The pessimistic take is that they have experienced short-term success out of necessity as people went to any store that was open to try and find essentials like toilet paper and hand sanitizer that were largely out of stock throughout the retail landscape. From that view, many of these customers could abandon the retailer when life returns to normal. As Philbin noted on the conference call, early on [during the pandemic], folks needed us. Will people still shop as much at Family Dollar when it's no longer a necessity?

Personally, I do not place too much weight on the recent results. I will need to see incremental data points that indicate that Family Dollar has truly won sustained business from these new customers. While I still believe that the Dollar Tree banner is a well-positioned retailer with attractive unit returns, I'm not yet willing to say the same thing for Family Dollar. For that reason, along with the recent run-up in the stock price, I plan on staying on the sidelines for now.

Disclosure: None

【can you combine sourdough starters】Were Hedge Funds Wrong About Crowding Into RealPage, Inc. (RP)?

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