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Is iRobot Corporation (IRBT) Going To Burn These Hedge Funds ?

Nina Todic

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards iRobot Corporation (NASDAQ:IRBT).

iRobot Corporation (NASDAQ:IRBT) shareholders have witnessed an increase in support from the world's most elite money managers lately. IRBT was in 11 hedge funds' portfolios at the end of the third quarter of 2019. There were 9 hedge funds in our database with IRBT holdings at the end of the previous quarter. Our calculations also showed that IRBT isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26388" align="aligncenter" width="468"] Lee Ainslie of Maverick Capital[/caption]

Lee Ainslie MAVERICK CAPITAL

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. We're going to take a peek at the new hedge fund action regarding iRobot Corporation (NASDAQ:IRBT).

Hedge fund activity in iRobot Corporation (NASDAQ:IRBT)

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in IRBT a year ago. 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, Citadel Investment Group was the largest shareholder of iRobot Corporation (NASDAQ:IRBT), with a stake worth $32.5 million reported as of the end of September. Trailing Citadel Investment Group was D E Shaw, which amassed a stake valued at $9.8 million. PDT Partners, Maverick Capital, and Holocene Advisors 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 Clearline Capital allocated the biggest weight to iRobot Corporation (NASDAQ:IRBT), around 0.76% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, setting aside 0.41 percent of its 13F equity portfolio to IRBT.

With a general bullishness amongst the heavyweights, key money managers have jumped into iRobot Corporation (NASDAQ:IRBT) headfirst. Holocene Advisors, managed by Brandon Haley, established the most outsized position in iRobot Corporation (NASDAQ:IRBT). Holocene Advisors had $2.4 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $1.8 million investment in the stock during the quarter. The following funds were also among the new IRBT investors: Marc Majzner's Clearline Capital, Donald Sussman's Paloma Partners, and Josh Goldberg's G2 Investment Partners Management.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as iRobot Corporation (NASDAQ:IRBT) but similarly valued. We will take a look at Trinseo S.A. (NYSE:TSE), Bottomline Technologies (de), Inc. (NASDAQ:EPAY), FGL Holdings (NYSE:FG), and Patterson-UTI Energy, Inc. (NASDAQ:PTEN). This group of stocks' market caps are similar to IRBT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TSE,13,85449,-10 EPAY,19,85411,3 FG,23,175870,-1 PTEN,26,251357,1 Average,20.25,149522,-1.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $150 million. That figure was $53 million in IRBT's case. Patterson-UTI Energy, Inc. (NASDAQ:PTEN) is the most popular stock in this table. On the other hand Trinseo S.A. (NYSE:TSE) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks iRobot Corporation (NASDAQ:IRBT) is even less popular than TSE. Hedge funds dodged a bullet by taking a bearish stance towards IRBT. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately IRBT wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IRBT investors were disappointed as the stock returned -29.4% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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