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Do Hedge Funds Love Roblox Corporation (RBLX)?

·6 min read

In this article we will check out the progression of hedge fund sentiment towards Roblox Corporation (NYSE:RBLX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Roblox Corporation (NYSE:RBLX) a good investment today? The smart money was betting on the stock. The number of bullish hedge fund positions rose by 46 recently. Roblox Corporation (NYSE:RBLX) was in 46 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that RBLX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the eyes of most investors, hedge funds are perceived as underperforming, old financial vehicles of the past. While there are more than 8000 funds with their doors open at present, Our researchers look at the upper echelon of this club, about 850 funds. These hedge fund managers have their hands on the majority of all hedge funds' total asset base, and by keeping an eye on their top stock picks, Insider Monkey has unsheathed a number of investment strategies that have historically outpaced the S&P 500 index. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year 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 .

Chase Coleman of Tiger Global

At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Now let's view the latest hedge fund action encompassing Roblox Corporation (NYSE:RBLX).

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

At the end of the first quarter, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 46 from one quarter earlier. The graph below displays the number of hedge funds with bullish position in RBLX over the last 23 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Tiger Global Management LLC held the most valuable stake in Roblox Corporation (NYSE:RBLX), which was worth $2621 million at the end of the fourth quarter. On the second spot was Altimeter Capital Management which amassed $180.1 million worth of shares. 12 West Capital Management, SoMa Equity Partners, and Kayak Investment Partners 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 Greenspring Associates allocated the biggest weight to Roblox Corporation (NYSE:RBLX), around 30.01% of its 13F portfolio. Tiger Global Management LLC is also relatively very bullish on the stock, dishing out 6.03 percent of its 13F equity portfolio to RBLX.

As aggregate interest increased, key hedge funds were leading the bulls' herd. Tiger Global Management LLC, managed by Chase Coleman, created the most valuable position in Roblox Corporation (NYSE:RBLX). Tiger Global Management LLC had $2.621 billion invested in the company at the end of the quarter. Brad Gerstner's Altimeter Capital Management also initiated a $180.1 million position during the quarter. The other funds with brand new RBLX positions are Joel Ramin's 12 West Capital Management, Gil Simon's SoMa Equity Partners, and Daryl Smith's Kayak Investment Partners.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Roblox Corporation (NYSE:RBLX) but similarly valued. These stocks are Cintas Corporation (NASDAQ:CTAS), Xcel Energy Inc (NASDAQ:XEL), Lufax Holding Ltd (NYSE:LU), Phillips 66 (NYSE:PSX), PPG Industries, Inc. (NYSE:PPG), Alcon Inc. (NYSE:ALC), and O'Reilly Automotive Inc (NASDAQ:ORLY). This group of stocks' market caps resemble RBLX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTAS,32,582628,-4 XEL,18,200349,-10 LU,9,208197,-2 PSX,24,290593,-2 PPG,25,173679,-9 ALC,23,753974,-1 ORLY,45,2704943,-4 Average,25.1,702052,-4.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $702 million. That figure was $3388 million in RBLX's case. O'Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand Lufax Holding Ltd (NYSE:LU) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Roblox Corporation (NYSE:RBLX) is more popular among hedge funds. Our overall hedge fund sentiment score for RBLX is 90. 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 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 returned 17.4% in 2021 through June 18th but still managed to beat the market by 6.1 percentage points. Hedge funds were also right about betting on RBLX as the stock returned 25.2% since the end of March (through 6/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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