The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtRockwell Automation Inc. (NYSE:ROK) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
Rockwell Automation Inc. (NYSE:ROK) was in 37 hedge funds' portfolios at the end of March. ROK investors should be aware of a decrease in hedge fund sentiment lately. There were 39 hedge funds in our database with ROK positions at the end of the previous quarter. Our calculations also showed that ROK isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 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.
[caption id="attachment_26388" align="aligncenter" width="400"] Lee Ainslie of Maverick Capital[/caption]
Now we're going to take a look at the latest hedge fund action encompassing Rockwell Automation Inc. (NYSE:ROK).
What have hedge funds been doing with Rockwell Automation Inc. (NYSE:ROK)?
Heading into the second quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. By comparison, 28 hedge funds held shares or bullish call options in ROK a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Rockwell Automation Inc. (NYSE:ROK) was held by Impax Asset Management, which reported holding $65.6 million worth of stock at the end of September. It was followed by Nitorum Capital with a $35.7 million position. Other investors bullish on the company included GAMCO Investors, Fisher Asset Management, and Markel Gayner Asset Management. In terms of the portfolio weights assigned to each position Heathbridge Capital Management allocated the biggest weight to Rockwell Automation Inc. (NYSE:ROK), around 5.5% of its 13F portfolio. Nitorum Capital is also relatively very bullish on the stock, designating 2.77 percent of its 13F equity portfolio to ROK.
Judging by the fact that Rockwell Automation Inc. (NYSE:ROK) has experienced declining sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of funds who were dropping their full holdings in the first quarter. It's worth mentioning that Renaissance Technologies said goodbye to the biggest investment of the "upper crust" of funds followed by Insider Monkey, worth close to $44.3 million in stock, and Andrew Sandler's Sandler Capital Management was right behind this move, as the fund cut about $9 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds in the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Rockwell Automation Inc. (NYSE:ROK) but similarly valued. We will take a look at Fortinet Inc (NASDAQ:FTNT), Nokia Corporation (NYSE:NOK), Dollar Tree, Inc. (NASDAQ:DLTR), and Citrix Systems, Inc. (NASDAQ:CTXS). All of these stocks' market caps resemble ROK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTNT,29,1465283,-13 NOK,23,178356,7 DLTR,42,1353619,-9 CTXS,38,1418404,4 Average,33,1103916,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $1104 million. That figure was $335 million in ROK's case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Nokia Corporation (NYSE:NOK) is the least popular one with only 23 bullish hedge fund positions. Rockwell Automation Inc. (NYSE:ROK) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on ROK as the stock returned 41.9% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.