Were Hedge Funds Right About Retail Opportunity Investments Corp (ROIC)?

In this article we will take a look at whether hedge funds think Retail Opportunity Investments Corp (NASDAQ:ROIC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Retail Opportunity Investments Corp (NASDAQ:ROIC) shareholders have witnessed an increase in hedge fund interest in recent months. Retail Opportunity Investments Corp (NASDAQ:ROIC) was in 18 hedge funds’ portfolios at the end of March. The all time high for this statistic is 21. There were 17 hedge funds in our database with ROIC holdings at the end of December. Our calculations also showed that ROIC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Peter Algert of Algert Global

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 check out the key hedge fund action regarding Retail Opportunity Investments Corp (NASDAQ:ROIC).

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

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in ROIC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ROIC A Good Stock To Buy?

Is ROIC A Good Stock To Buy?

More specifically, Balyasny Asset Management was the largest shareholder of Retail Opportunity Investments Corp (NASDAQ:ROIC), with a stake worth $11.8 million reported as of the end of March. Trailing Balyasny Asset Management was D E Shaw, which amassed a stake valued at $8.1 million. Renaissance Technologies, Millennium Management, and Two Sigma Advisors 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 Brasada Capital Management allocated the biggest weight to Retail Opportunity Investments Corp (NASDAQ:ROIC), around 0.68% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.54 percent of its 13F equity portfolio to ROIC.

As industrywide interest jumped, some big names have jumped into Retail Opportunity Investments Corp (NASDAQ:ROIC) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the largest position in Retail Opportunity Investments Corp (NASDAQ:ROIC). Balyasny Asset Management had $11.8 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also made a $2 million investment in the stock during the quarter. The other funds with brand new ROIC positions are Donald Sussman’s Paloma Partners and Peter Algert’s Algert Global.

Let’s go over 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 Harmony Biosciences Holdings, Inc. (NASDAQ:HRMY), PROS Holdings, Inc. (NYSE:PRO), SM Energy Company (NYSE:SM), Sundial Growers Inc. (NASDAQ:SNDL), At Home Group Inc. (NYSE:HOME), Cal-Maine Foods Inc (NASDAQ:CALM), and Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL). 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 HRMY,10,178876,2 PRO,12,268268,-8 SM,16,237416,-4 SNDL,7,18832,5 HOME,30,806839,-1 CALM,20,224111,-1 MDGL,17,494379,2 Average,16,318389,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $318 million. That figure was $56 million in ROIC’s case. At Home Group Inc. (NYSE:HOME) is the most popular stock in this table. On the other hand Sundial Growers Inc. (NASDAQ:SNDL) is the least popular one with only 7 bullish hedge fund positions. Retail Opportunity Investments Corp (NASDAQ:ROIC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ROIC is 55.6. 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 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 beat the market again by 10.1 percentage points. Unfortunately ROIC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ROIC were disappointed as the stock returned 11.1% 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 many of these stocks already outperformed the market since 2019.

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