Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Things completely reversed during the first half of 2019. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Roper Technologies, Inc. (NYSE:ROP) to find out whether it was one of their high conviction long-term ideas.
Roper Technologies, Inc. (NYSE:ROP) has seen an increase in support from the world’s most elite money managers lately. ROP was in 35 hedge funds’ portfolios at the end of June. There were 22 hedge funds in our database with ROP holdings at the end of the previous quarter. Our calculations also showed that ROP isn’t among the 30 most popular stocks among hedge funds (see the video at the end of this article).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the recent hedge fund action surrounding Roper Technologies, Inc. (NYSE:ROP).
How have hedgies been trading Roper Technologies, Inc. (NYSE:ROP)?
At the end of the second quarter, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 59% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ROP over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Roper Technologies, Inc. (NYSE:ROP) was held by Akre Capital Management, which reported holding $574 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $68.3 million position. Other investors bullish on the company included Citadel Investment Group, Waratah Capital Advisors, and Millennium Management.
As aggregate interest increased, key money managers have jumped into Roper Technologies, Inc. (NYSE:ROP) headfirst. Renaissance Technologies, founded by Jim Simons, created the largest position in Roper Technologies, Inc. (NYSE:ROP). Renaissance Technologies had $68.3 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also made a $22.5 million investment in the stock during the quarter. The following funds were also among the new ROP investors: Joel Greenblatt’s Gotham Asset Management, Peter Muller’s PDT Partners, and Matthew Tewksbury’s Stevens Capital Management.
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. We will take a look at Edwards Lifesciences Corporation (NYSE:EW), Delta Air Lines, Inc. (NYSE:DAL), Constellation Brands, Inc. (NYSE:STZ), and Moody’s Corporation (NYSE:MCO). This group of stocks’ market caps match ROP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EW | 33 | 873482 | 8 |
| DAL | 70 | 7271037 | 10 |
| STZ | 38 | 1438593 | 0 |
| MCO | 39 | 7178921 | 5 |
| Average | 45 | 4190508 | 5.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45 hedge funds with bullish positions and the average amount invested in these stocks was $4191 million. That figure was $944 million in ROP’s case. Delta Air Lines, Inc. (NYSE:DAL) is the most popular stock in this table. On the other hand Edwards Lifesciences Corporation (NYSE:EW) is the least popular one with only 33 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. 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ROP wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ROP investors were disappointed as the stock returned -2.5% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
