We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's take a look at whether Rogers Corporation (NYSE:ROG) 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.
Hedge fund interest in Rogers Corporation (NYSE:ROG) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Taylor Morrison Home Corp (NYSE:TMHC), Nelnet, Inc. (NYSE:NNI), and Zogenix, Inc. (NASDAQ:ZGNX) to gather more data points. Our calculations also showed that ROG isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_746893" align="aligncenter" width="397"] Paul Marshall of Marshall Wace[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now we're going to take a look at the fresh hedge fund action regarding Rogers Corporation (NYSE:ROG).
Hedge fund activity in Rogers Corporation (NYSE:ROG)
At Q4's end, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ROG over the last 18 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Rogers Corporation (NYSE:ROG) was held by Fisher Asset Management, which reported holding $27 million worth of stock at the end of September. It was followed by Millennium Management with a $5.1 million position. Other investors bullish on the company included Citadel Investment Group, Marshall Wace LLP, and D E Shaw. In terms of the portfolio weights assigned to each position Boardman Bay Capital Management allocated the biggest weight to Rogers Corporation (NYSE:ROG), around 2.67% of its 13F portfolio. G2 Investment Partners Management is also relatively very bullish on the stock, designating 0.43 percent of its 13F equity portfolio to ROG.
Due to the fact that Rogers Corporation (NYSE:ROG) has witnessed a decline in interest from the aggregate hedge fund industry, it's easy to see that there were a few money managers who were dropping their entire stakes last quarter. It's worth mentioning that Larry Chen and Terry Zhang's Tairen Capital cut the largest stake of the "upper crust" of funds watched by Insider Monkey, valued at an estimated $4.7 million in stock, and Minhua Zhang's Weld Capital Management was right behind this move, as the fund said goodbye to about $0.5 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Rogers Corporation (NYSE:ROG) but similarly valued. We will take a look at Taylor Morrison Home Corp (NYSE:TMHC), Nelnet, Inc. (NYSE:NNI), Zogenix, Inc. (NASDAQ:ZGNX), and Progyny, Inc. (NASDAQ:PGNY). This group of stocks' market valuations resemble ROG's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TMHC,28,458004,1 NNI,14,100877,2 ZGNX,33,928215,-1 PGNY,8,20023,8 Average,20.75,376780,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $377 million. That figure was $63 million in ROG's case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Progyny, Inc. (NASDAQ:PGNY) is the least popular one with only 8 bullish hedge fund positions. Rogers Corporation (NYSE:ROG) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately ROG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ROG were disappointed as the stock returned -27.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.