The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Roku, Inc. (NASDAQ:ROKU) and determine whether the smart money was really smart about this stock.
Is Roku, Inc. (NASDAQ:ROKU) a cheap investment now? The best stock pickers were turning bullish. The number of bullish hedge fund positions advanced by 6 in recent months. Roku, Inc. (NASDAQ:ROKU) was in 41 hedge funds' portfolios at the end of June. The all time high for this statistics is 39. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ROKU 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Matthew Hulsizer of PEAK6 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 precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind let's take a gander at the latest hedge fund action surrounding Roku, Inc. (NASDAQ:ROKU).
Hedge fund activity in Roku, Inc. (NASDAQ:ROKU)
At the end of the second quarter, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in ROKU a year ago. With the smart money's capital changing hands, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin's Citadel Investment Group has the number one call position in Roku, Inc. (NASDAQ:ROKU), worth close to $220 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by PEAK6 Capital Management, led by Matthew Hulsizer, holding a $77 million call position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining peers that are bullish consist of Anand Parekh's Alyeska Investment Group, Bruce Emery's Greenvale Capital and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Ogborne Capital allocated the biggest weight to Roku, Inc. (NASDAQ:ROKU), around 10.18% of its 13F portfolio. Empirical Capital Partners is also relatively very bullish on the stock, designating 9.67 percent of its 13F equity portfolio to ROKU.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Alyeska Investment Group, managed by Anand Parekh, created the biggest position in Roku, Inc. (NASDAQ:ROKU). Alyeska Investment Group had $60.7 million invested in the company at the end of the quarter. Bruce Emery's Greenvale Capital also made a $60.6 million investment in the stock during the quarter. The following funds were also among the new ROKU investors: Jacob Mitchell's Antipodes Partners, Peter S. Park's Park West Asset Management, and Seth Wunder's Black-and-White Capital.
Let's go over hedge fund activity in other stocks similar to Roku, Inc. (NASDAQ:ROKU). These stocks are Boston Properties, Inc. (NYSE:BXP), EPAM Systems Inc (NYSE:EPAM), Teradyne, Inc. (NASDAQ:TER), Dover Corporation (NYSE:DOV), Rollins, Inc. (NYSE:ROL), International Paper Company (NYSE:IP), and The Hartford Financial Services Group Inc (NYSE:HIG). This group of stocks' market valuations are closest to ROKU's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BXP,36,539228,7 EPAM,28,482887,1 TER,34,1354430,6 DOV,40,683970,9 ROL,29,577262,4 IP,29,238219,0 HIG,39,917896,2 Average,33.6,684842,4.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.6 hedge funds with bullish positions and the average amount invested in these stocks was $685 million. That figure was $451 million in ROKU's case. Dover Corporation (NYSE:DOV) is the most popular stock in this table. On the other hand EPAM Systems Inc (NYSE:EPAM) is the least popular one with only 28 bullish hedge fund positions. Compared to these stocks Roku, Inc. (NASDAQ:ROKU) is more popular among hedge funds. Our overall hedge fund sentiment score for ROKU 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 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 returned 33% in 2020 through the end of August but still managed to beat the market by 23.2 percentage points. Hedge funds were also right about betting on ROKU as the stock returned 48.9% since the end of June 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.
Get real-time email alerts: Follow Roku Inc (NASDAQ:ROKU)
Disclosure: None. This article was originally published at Insider Monkey.