Here is What Hedge Funds Think About Rollins, Inc. (ROL)

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.2% in the 12 months ending October 30, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of September 2014) generated a return of 9.5% during the same 12-month period, with 63% of these stock picks outperformed the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 16-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Rollins, Inc. (NYSE:ROL).

Is Rollins, Inc. (NYSE:ROL) a good investment now? Investors who are in the know are taking an optimistic view. The number of long hedge fund positions moved up by 9 lately. 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 Antero Resources Corp (NYSE:AR), Markit Ltd (NASDAQ:MRKT), and iShares MSCI ACWI Index Fund (NASDAQ:ACWI) to gather more data points.

According to most stock holders, hedge funds are viewed as underperforming, old investment tools of yesteryear. While there are over 8000 funds trading today, Our researchers hone in on the bigwigs of this club, about 700 funds. Most estimates calculate that this group of people oversee the majority of the hedge fund industry’s total capital, and by keeping an eye on their unrivaled equity investments, Insider Monkey has revealed a number of investment strategies that have historically surpassed Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, we’re going to take a look at the latest action surrounding Rollins, Inc. (NYSE:ROL).

What does the smart money think about Rollins, Inc. (NYSE:ROL)?

At the Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 69% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the biggest position in Rollins, Inc. (NYSE:ROL), worth close to $134.8 million, comprising 1.3% of its total 13F portfolio. The second largest stake is held by GAMCO Investors, led by Mario Gabelli, holding an $114.5 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass Jim Simons’ Renaissance Technologies, Pasco Alfaro / Richard Tumure’s Miura Global Management and Tim Curro’s Value Holdings LP.

As one would reasonably expect, key money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, assembled the largest position in Rollins, Inc. (NYSE:ROL). Millennium Management had $2.1 million invested in the company at the end of the quarter. George Hall’s Clinton Group also made an $1.1 million investment in the stock during the quarter. The other funds with brand new ROL positions are Cliff Asness’s AQR Capital Management, Ray Dalio’s Bridgewater Associates, and Ken Griffin’s Citadel Investment Group.

Let’s also examine hedge fund activity in other stocks similar to Rollins, Inc. (NYSE:ROL). We will take a look at Antero Resources Corp (NYSE:AR), Markit Ltd (NASDAQ:MRKT), iShares MSCI ACWI Index Fund (NASDAQ:ACWI), and Regency Centers Corp (NYSE:REG). This group of stocks’ market values match ROL’s market value.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $301 million. That figure was $347 million in ROL’s case. Antero Resources Corp (NYSE:AR) is the most popular stock in this table. On the other hand iShares MSCI ACWI Index Fund (NASDAQ:ACWI) is the least popular one with only 5 bullish hedge fund positions. Rollins, Inc. (NYSE:ROL) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AR might be a better candidate to consider a long position.