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Hedge Funds Are Buying Rollins, Inc. (ROL)

Abigail Fisher

A market correction in the fourth quarter, spurred by a number of global macroeconomic concerns and rising interest rates ended up having a negative impact on the markets and many hedge funds as a result. The stocks of smaller companies were especially hard hit during this time as investors fled to investments seen as being safer. This is evident in the fact that the Russell 2000 ETF underperformed the S&P 500 ETF by nearly 7 percentage points during the fourth quarter. We also received indications that hedge funds were trimming their positions amid the market volatility and uncertainty, and given their greater inclination towards smaller cap stocks than other investors, it follows that a stronger sell-off occurred in those stocks. Let's study the hedge fund sentiment to see how those concerns affected their ownership of Rollins, Inc. (NYSE:ROL) during the quarter.

Is Rollins, Inc. (NYSE:ROL) a buy, sell, or hold? Investors who are in the know are buying. The number of bullish hedge fund positions went up by 5 in recent months. Our calculations also showed that ROL isn't among the 30 most popular stocks among hedge funds.

If you'd ask most traders, hedge funds are viewed as worthless, old investment vehicles of yesteryear. While there are greater than 8000 funds trading at present, We choose to focus on the bigwigs of this club, approximately 750 funds. These investment experts orchestrate the majority of the hedge fund industry's total capital, and by following their unrivaled equity investments, Insider Monkey has unsheathed numerous investment strategies that have historically beaten the S&P 500 index. Insider Monkey's flagship hedge fund strategy exceeded the S&P 500 index by nearly 5 percentage points a year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

David Harding

We're going to take a glance at the fresh hedge fund action surrounding Rollins, Inc. (NYSE:ROL).

Hedge fund activity in Rollins, Inc. (NYSE:ROL)

At the end of the fourth quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in ROL 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.

ROL_mar2019

Among these funds, GAMCO Investors held the most valuable stake in Rollins, Inc. (NYSE:ROL), which was worth $98.5 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $55.4 million worth of shares. Moreover, Markel Gayner Asset Management, Renaissance Technologies, and Millennium Management were also bullish on Rollins, Inc. (NYSE:ROL), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, some big names have jumped into Rollins, Inc. (NYSE:ROL) headfirst. Winton Capital Management, managed by David Harding, initiated the most outsized position in Rollins, Inc. (NYSE:ROL). Winton Capital Management had $12.5 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $10.8 million investment in the stock during the quarter. The other funds with brand new ROL positions are Steve Cohen's Point72 Asset Management, Matthew Tewksbury's Stevens Capital Management, and Matthew Hulsizer's PEAK6 Capital Management.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Rollins, Inc. (NYSE:ROL) but similarly valued. These stocks are Altice USA, Inc. (NYSE:ATUS), WellCare Health Plans, Inc. (NYSE:WCG), Vornado Realty Trust (NYSE:VNO), and Expeditors International of Washington, Inc. (NASDAQ:EXPD). All of these stocks' market caps are similar to ROL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ATUS,51,1375717,4 WCG,39,955525,4 VNO,23,336593,-2 EXPD,24,626087,2 Average,34.25,823481,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34.25 hedge funds with bullish positions and the average amount invested in these stocks was $823 million. That figure was $270 million in ROL's case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Vornado Realty Trust (NYSE:VNO) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks Rollins, Inc. (NYSE:ROL) is even less popular than VNO. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately ROL wasn't in this group. Hedge funds that bet on ROL were disappointed as the stock returned 12.4% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.

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

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