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Was The Smart Money Right About Roper Technologies Inc. (ROP)?

·6 min read

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31st, so let’s proceed with the discussion of the hedge fund sentiment on Roper Technologies Inc. (NYSE:ROP).

Is Roper Technologies Inc. (NYSE:ROP) the right investment to pursue these days? The smart money was turning less bullish. The number of long hedge fund bets fell by 10 recently. Roper Technologies Inc. (NYSE:ROP) was in 40 hedge funds' portfolios at the end of December. The all time high for this statistic is 50. Our calculations also showed that ROP isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Algert of Algert Global

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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. With all of this in mind we're going to take a peek at the latest hedge fund action regarding Roper Technologies Inc. (NYSE:ROP).

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

Heading into the first quarter of 2021, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in ROP over the last 22 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Among these funds, Akre Capital Management held the most valuable stake in Roper Technologies Inc. (NYSE:ROP), which was worth $824.7 million at the end of the fourth quarter. On the second spot was Echo Street Capital Management which amassed $95 million worth of shares. D E Shaw, Bristol Gate Capital Partners, and Sirios Capital Management 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 Lansing Management allocated the biggest weight to Roper Technologies Inc. (NYSE:ROP), around 13.6% of its 13F portfolio. 11 Capital Partners is also relatively very bullish on the stock, dishing out 6.5 percent of its 13F equity portfolio to ROP.

Since Roper Technologies Inc. (NYSE:ROP) has experienced declining sentiment from hedge fund managers, logic holds that there were a few hedge funds that elected to cut their positions entirely last quarter. Intriguingly, Renaissance Technologies dumped the largest investment of all the hedgies followed by Insider Monkey, valued at about $68.5 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund dumped about $12.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 10 funds last quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Roper Technologies Inc. (NYSE:ROP) but similarly valued. These stocks are Keurig Dr Pepper Inc. (NASDAQ:KDP), The Blackstone Group Inc. (NYSE:BX), NXP Semiconductors NV (NASDAQ:NXPI), Peloton Interactive, Inc. (NASDAQ:PTON), Vodafone Group Plc (NASDAQ:VOD), Palantir Technologies Inc. (NYSE:PLTR), and Cognizant Technology Solutions Corp (NASDAQ:CTSH). This group of stocks' market caps are similar to ROP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KDP,29,1076705,-12 BX,54,1450344,5 NXPI,66,2259680,-2 PTON,63,5666462,5 VOD,17,745457,-5 PLTR,38,1902514,7 CTSH,46,3517450,1 Average,44.7,2374087,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.7 hedge funds with bullish positions and the average amount invested in these stocks was $2374 million. That figure was $1349 million in ROP's case. NXP Semiconductors NV (NASDAQ:NXPI) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 17 bullish hedge fund positions. Roper Technologies Inc. (NYSE:ROP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ROP is 42.5. 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. 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 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and surpassed the market again by 1.6 percentage points. Unfortunately ROP wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ROP investors were disappointed as the stock returned 3.8% since the end of December (through 4/30) 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.

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

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