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Hedge Funds Are Selling T. Rowe Price Group, Inc. (TROW)

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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about T. Rowe Price Group, Inc. (NASDAQ:TROW) in this article.

T. Rowe Price Group, Inc. (NASDAQ:TROW) investors should pay attention to a decrease in enthusiasm from smart money lately. T. Rowe Price Group, Inc. (NASDAQ:TROW) was in 24 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that TROW isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 79 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Tom Gayner
Tom Gayner

Tom Gayner of Markel Gayner Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 analyze the latest hedge fund action regarding T. Rowe Price Group, Inc. (NASDAQ:TROW).

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

Heading into the third quarter of 2021, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TROW over the last 24 quarters. With the smart money's sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Among these funds, AQR Capital Management held the most valuable stake in T. Rowe Price Group, Inc. (NASDAQ:TROW), which was worth $147.9 million at the end of the second quarter. On the second spot was Arrowstreet Capital which amassed $79.2 million worth of shares. Markel Gayner Asset Management, Marshall Wace LLP, and Bridgewater Associates 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 Markel Gayner Asset Management allocated the biggest weight to T. Rowe Price Group, Inc. (NASDAQ:TROW), around 0.79% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, dishing out 0.37 percent of its 13F equity portfolio to TROW.

Since T. Rowe Price Group, Inc. (NASDAQ:TROW) has witnessed falling interest from the aggregate hedge fund industry, it's safe to say that there was a specific group of funds who sold off their entire stakes heading into Q3. Interestingly, Donald Sussman's Paloma Partners dropped the biggest position of the 750 funds watched by Insider Monkey, worth about $3.2 million in stock, and Qing Li's Sciencast Management was right behind this move, as the fund dumped about $1.6 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q3.

Let's also examine hedge fund activity in other stocks similar to T. Rowe Price Group, Inc. (NASDAQ:TROW). These stocks are IHS Markit Ltd. (NYSE:INFO), Agilent Technologies Inc. (NYSE:A), The Bank of New York Mellon Corporation (NYSE:BK), Schlumberger Limited. (NYSE:SLB), TE Connectivity Ltd. (NYSE:TEL), BCE Inc. (NYSE:BCE), and Match Group, Inc. (NASDAQ:MTCH). This group of stocks' market valuations resemble TROW's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INFO,61,5947551,7 A,39,3891487,-3 BK,52,4907372,3 SLB,41,1067022,-9 TEL,39,2134995,0 BCE,14,113288,4 MTCH,63,3368893,-5 Average,44.1,3061515,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.1 hedge funds with bullish positions and the average amount invested in these stocks was $3062 million. That figure was $407 million in TROW's case. Match Group, Inc. (NASDAQ:MTCH) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 14 bullish hedge fund positions. T. Rowe Price Group, Inc. (NASDAQ:TROW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TROW is 33.8. 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 gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on TROW as the stock returned 5% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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