The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 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 June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded iRobot Corporation (NASDAQ:IRBT) and determine whether the smart money was really smart about this stock.
iRobot Corporation (NASDAQ:IRBT) has seen an increase in hedge fund interest lately. iRobot Corporation (NASDAQ:IRBT) was in 22 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 19. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that IRBT isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Harding of Winton Capital 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 precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Now we’re going to take a glance at the new hedge fund action encompassing iRobot Corporation (NASDAQ:IRBT).
Hedge fund activity in iRobot Corporation (NASDAQ:IRBT)
Heading into the third quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IRBT over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, D. E. Shaw’s D E Shaw has the most valuable position in iRobot Corporation (NASDAQ:IRBT), worth close to $40.3 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Citadel Investment Group, led by Ken Griffin, holding a $33.1 million call position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other members of the smart money that are bullish include D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Ionic Capital Management allocated the biggest weight to iRobot Corporation (NASDAQ:IRBT), around 0.37% of its 13F portfolio. Sciencast Management is also relatively very bullish on the stock, dishing out 0.33 percent of its 13F equity portfolio to IRBT.
As aggregate interest increased, key money managers were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, initiated the biggest position in iRobot Corporation (NASDAQ:IRBT). Citadel Investment Group had $11.1 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $6.3 million position during the quarter. The other funds with new positions in the stock are Noam Gottesman’s GLG Partners, David Harding’s Winton Capital Management, and Donald Sussman’s Paloma Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as iRobot Corporation (NASDAQ:IRBT) but similarly valued. These stocks are LivaNova PLC (NASDAQ:LIVN), Capri Holdings Limited (NYSE:CPRI), Inari Medical, Inc. (NASDAQ:NARI), MGE Energy, Inc. (NASDAQ:MGEE), BancorpSouth Bank (NYSE:BXS), Park Hotels & Resorts Inc. (NYSE:PK), and Taubman Centers, Inc. (NYSE:TCO). This group of stocks’ market valuations resemble IRBT’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LIVN | 29 | 368844 | 5 |
| CPRI | 28 | 446164 | -1 |
| NARI | 19 | 79851 | 19 |
| MGEE | 5 | 66359 | -1 |
| BXS | 10 | 32775 | -5 |
| PK | 21 | 90634 | -5 |
| TCO | 40 | 521866 | 2 |
| Average | 21.7 | 229499 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $229 million. That figure was $127 million in IRBT’s case. Taubman Centers, Inc. (NYSE:TCO) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 5 bullish hedge fund positions. iRobot Corporation (NASDAQ:IRBT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IRBT is 62.3. 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 positive signal but 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 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately IRBT wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on IRBT were disappointed as the stock returned -9.5% in Q3 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 many of these stocks already outperformed the market so far this year.
Follow Irobot Corp (NASDAQ:IRBT)
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Disclosure: None. This article was originally published at Insider Monkey.
