In this article you are going to find out whether hedge funds think Ross Stores, Inc. (NASDAQ:ROST) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Ross Stores, Inc. (NASDAQ:ROST) has experienced an increase in support from the world's most elite money managers of late. ROST was in 49 hedge funds' portfolios at the end of March. There were 48 hedge funds in our database with ROST positions at the end of the previous quarter. Our calculations also showed that ROST isn't among the 30 most popular stocks among hedge funds (click for Q1 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 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 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.
[caption id="attachment_340081" align="aligncenter" width="400"] Phill Gross of Adage Capital Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. Also, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the recent hedge fund action regarding Ross Stores, Inc. (NASDAQ:ROST).
How are hedge funds trading Ross Stores, Inc. (NASDAQ:ROST)?
At the end of the first quarter, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ROST over the last 18 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.
More specifically, AQR Capital Management was the largest shareholder of Ross Stores, Inc. (NASDAQ:ROST), with a stake worth $167.7 million reported as of the end of September. Trailing AQR Capital Management was Holocene Advisors, which amassed a stake valued at $145.7 million. Adage Capital Management, BlueSpruce Investments, and Alyeska Investment Group 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 Bristol Gate Capital Partners allocated the biggest weight to Ross Stores, Inc. (NASDAQ:ROST), around 5.9% of its 13F portfolio. Highside Global Management is also relatively very bullish on the stock, designating 3.61 percent of its 13F equity portfolio to ROST.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls' herd. Holocene Advisors, managed by Brandon Haley, assembled the most valuable position in Ross Stores, Inc. (NASDAQ:ROST). Holocene Advisors had $145.7 million invested in the company at the end of the quarter. Aaron Cowen's Suvretta Capital Management also initiated a $46.5 million position during the quarter. The other funds with new positions in the stock are Louis Bacon's Moore Global Investments, Clint Carlson's Carlson Capital, and John Osterweis's Osterweis Capital Management.
Let's also examine hedge fund activity in other stocks similar to Ross Stores, Inc. (NASDAQ:ROST). These stocks are HCA Healthcare Inc (NYSE:HCA), SBA Communications Corporation (NASDAQ:SBAC), Monster Beverage Corp (NASDAQ:MNST), and The Kraft Heinz Company (NASDAQ:KHC). This group of stocks' market valuations are closest to ROST's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HCA,87,2171218,24 SBAC,46,1835315,1 MNST,43,1843978,-2 KHC,39,8314956,5 Average,53.75,3541367,7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 53.75 hedge funds with bullish positions and the average amount invested in these stocks was $3541 million. That figure was $982 million in ROST's case. HCA Healthcare Inc (NYSE:HCA) is the most popular stock in this table. On the other hand The Kraft Heinz Company (NASDAQ:KHC) is the least popular one with only 39 bullish hedge fund positions. Ross Stores, Inc. (NASDAQ:ROST) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 7.9% in 2020 through May 22nd and surpassed the market by 15.6 percentage points. Unfortunately ROST wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ROST investors were disappointed as the stock returned 7.9% during the second quarter 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.