While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, declining oil prices and the trade war with China, many smart money investors are keeping their optimism regarding the current bull run, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding T. Rowe Price Group, Inc. (NASDAQ:TROW).
Is T. Rowe Price Group, Inc. (NASDAQ:TROW) a healthy stock for your portfolio? The best stock pickers are getting less optimistic. The number of bullish hedge fund bets fell by 8 lately. Our calculations also showed that trow isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Cliff Asness of AQR Capital Management
Let’s take a look at the new hedge fund action regarding T. Rowe Price Group, Inc. (NASDAQ:TROW).
What have hedge funds been doing with T. Rowe Price Group, Inc. (NASDAQ:TROW)?
At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -32% from the previous quarter. On the other hand, there were a total of 24 hedge funds with a bullish position in TROW at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in T. Rowe Price Group, Inc. (NASDAQ:TROW). AQR Capital Management has a $178.2 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $74.8 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Phill Gross and Robert Atchinson’s Adage Capital Management, Tom Gayner’s Markel Gayner Asset Management and Principal Global Investors’s Columbus Circle Investors.
Because T. Rowe Price Group, Inc. (NASDAQ:TROW) has faced bearish sentiment from the smart money, it’s easy to see that there was a specific group of money managers that elected to cut their positions entirely last quarter. It’s worth mentioning that John D. Gillespie’s Prospector Partners dumped the biggest investment of all the hedgies watched by Insider Monkey, valued at an estimated $10.5 million in stock. George Hall’s fund, Clinton Group, also dumped its stock, about $1.8 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 8 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as T. Rowe Price Group, Inc. (NASDAQ:TROW) but similarly valued. These stocks are McKesson Corporation (NYSE:MCK), Paychex, Inc. (NASDAQ:PAYX), PPG Industries, Inc. (NYSE:PPG), and DXC Technology Company (NYSE:DXC). All of these stocks’ market caps match TROW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MCK | 42 | 2977552 | 2 |
| PAYX | 30 | 1076148 | 6 |
| PPG | 22 | 655098 | 3 |
| DXC | 50 | 2485422 | -6 |
| Average | 36 | 1798555 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $1.80 billion. That figure was $396 million in TROW’s case. DXC Technology Company (NYSE:DXC) is the most popular stock in this table. On the other hand PPG Industries, Inc. (NYSE:PPG) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks T. Rowe Price Group, Inc. (NASDAQ:TROW) is even less popular than PPG. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
