Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 817 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 RBC Bearings Incorporated (NASDAQ:ROLL) in this article.
Is RBC Bearings Incorporated (NASDAQ:ROLL) going to take off soon? The smart money was betting on the stock. The number of long hedge fund bets inched up by 1 recently. RBC Bearings Incorporated (NASDAQ:ROLL) was in 18 hedge funds' portfolios at the end of September. The all time high for this statistic is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ROLL isn't among the 30 most popular stocks among hedge funds (click for Q3 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind let's check out the recent hedge fund action encompassing RBC Bearings Incorporated (NASDAQ:ROLL).
Do Hedge Funds Think ROLL Is A Good Stock To Buy Now?
At third quarter's end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ROLL over the last 21 quarters. 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, Royce & Associates was the largest shareholder of RBC Bearings Incorporated (NASDAQ:ROLL), with a stake worth $22.3 million reported as of the end of September. Trailing Royce & Associates was Millennium Management, which amassed a stake valued at $6.7 million. Citadel Investment Group, Arrowstreet Capital, and Renaissance Technologies 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 Algert Coldiron Investors allocated the biggest weight to RBC Bearings Incorporated (NASDAQ:ROLL), around 0.45% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.24 percent of its 13F equity portfolio to ROLL.
With a general bullishness amongst the heavyweights, key money managers have jumped into RBC Bearings Incorporated (NASDAQ:ROLL) headfirst. Renaissance Technologies, assembled the largest position in RBC Bearings Incorporated (NASDAQ:ROLL). Renaissance Technologies had $1.9 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also initiated a $0.8 million position during the quarter. The only other fund with a brand new ROLL position is Brandon Haley's Holocene Advisors.
Let's check out hedge fund activity in other stocks similar to RBC Bearings Incorporated (NASDAQ:ROLL). These stocks are SLM Corp (NASDAQ:SLM), Installed Building Products Inc (NYSE:IBP), Ormat Technologies, Inc. (NYSE:ORA), Companhia Paranaense de Energia (NYSE:ELP), nVent Electric plc (NYSE:NVT), MGIC Investment Corporation (NYSE:MTG), and Qurate Retail, Inc. (NASDAQ:QRTEA). This group of stocks' market values match ROLL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SLM,22,630822,-10 IBP,20,116472,-1 ORA,19,198924,0 ELP,6,21608,-6 NVT,34,374896,7 MTG,41,314368,1 QRTEA,41,608143,-2 Average,26.1,323605,-1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $52 million in ROLL's case. MGIC Investment Corporation (NYSE:MTG) is the most popular stock in this table. On the other hand Companhia Paranaense de Energia (NYSE:ELP) is the least popular one with only 6 bullish hedge fund positions. RBC Bearings Incorporated (NASDAQ:ROLL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ROLL is 53.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on ROLL as the stock returned 45.2% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.