Is Rollins, Inc. (NYSE:ROL) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. 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.
Is Rollins, Inc. (NYSE:ROL) the right pick for your portfolio? Money managers are turning less bullish. The number of bullish hedge fund positions fell by 2 lately. Our calculations also showed that ROL isn't among the 30 most popular stocks among hedge funds.
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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's check out the latest hedge fund action regarding Rollins, Inc. (NYSE:ROL).
What does the smart money think about Rollins, Inc. (NYSE:ROL)?
At the end of the first quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in ROL a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GAMCO Investors held the most valuable stake in Rollins, Inc. (NYSE:ROL), which was worth $110.4 million at the end of the first quarter. On the second spot was AQR Capital Management which amassed $57.8 million worth of shares. Moreover, Markel Gayner Asset Management, Renaissance Technologies, and Winton Capital Management were also bullish on Rollins, Inc. (NYSE:ROL), allocating a large percentage of their portfolios to this stock.
Since Rollins, Inc. (NYSE:ROL) has faced falling interest from hedge fund managers, it's safe to say that there were a few hedge funds that decided to sell off their entire stakes heading into Q3. At the top of the heap, Israel Englander's Millennium Management dumped the largest position of all the hedgies watched by Insider Monkey, totaling about $10.8 million in stock. Steve Cohen's fund, Point72 Asset Management, also sold off its stock, about $7.1 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds heading into Q3.
Let's now take a look at hedge fund activity in other stocks similar to Rollins, Inc. (NYSE:ROL). We will take a look at Dover Corporation (NYSE:DOV), Gartner Inc (NYSE:IT), Wayfair Inc (NYSE:W), and WellCare Health Plans, Inc. (NYSE:WCG). This group of stocks' market values match ROL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DOV,30,474968,1 IT,15,1205964,-6 W,30,2455188,2 WCG,47,1898984,8 Average,30.5,1508776,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.5 hedge funds with bullish positions and the average amount invested in these stocks was $1509 million. That figure was $287 million in ROL's case. WellCare Health Plans, Inc. (NYSE:WCG) is the most popular stock in this table. On the other hand Gartner Inc (NYSE:IT) is the least popular one with only 15 bullish hedge fund positions. Rollins, Inc. (NYSE:ROL) 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately ROL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ROL investors were disappointed as the stock returned -9.1% 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.