Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Is Rockwell Collins, Inc. (NYSE:COL) a bargain? The smart money is reducing their bets on the stock. The number of long hedge fund positions were cut by 3 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as D.R. Horton, Inc. (NYSE:DHI), SL Green Realty Corp (NYSE:SLG), and CBRE Group Inc (NYSE:CBG) to gather more data points.
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With all of this in mind, we’re going to take a glance at the recent action regarding Rockwell Collins, Inc. (NYSE:COL).
How have hedgies been trading Rockwell Collins, Inc. (NYSE:COL)?
At Q3’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from one quarter earlier. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Ken Griffin’s Citadel Investment Group has the biggest position in Rockwell Collins, Inc. (NYSE:COL), worth close to $74 million, comprising 0.1% of its total 13F portfolio. The second largest stake is held by Jim Simons of Renaissance Technologies, with a $43.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions include David Harding’s Winton Capital Management, D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Since Rockwell Collins, Inc. (NYSE:COL) has experienced a declination in interest from the aggregate hedge fund industry, we can see that there exists a select few hedge funds that slashed their full holdings last quarter. Intriguingly, Alexander Mitchell’s Scopus Asset Management dropped the largest stake of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $31.6 million in stock. Jacob Gottlieb’s fund, Visium Asset Management, also said goodbye to its stock, about $16.4 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Rockwell Collins, Inc. (NYSE:COL) but similarly valued. These stocks are D.R. Horton, Inc. (NYSE:DHI), SL Green Realty Corp (NYSE:SLG), CBRE Group Inc (NYSE:CBG), and Newell Rubbermaid Inc. (NYSE:NWL). All of these stocks’ market caps match COL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DHI | 40 | 1299030 | -2 |
| SLG | 12 | 99631 | -8 |
| CBG | 32 | 1662629 | 0 |
| NWL | 27 | 468886 | 8 |
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $883 million. That figure was $191 million in COL’s case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand SL Green Realty Corp (NYSE:SLG) is the least popular one with only 12 bullish hedge fund positions. Rockwell Collins, Inc. (NYSE:COL) 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. In this regard DHI might be a better candidate to consider a long position.
