Is ROOT Stock A Buy or Sell?

In this article you are going to find out whether hedge funds think Root, Inc. (NASDAQ:ROOT) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is ROOT stock a buy? The best stock pickers were getting more bullish. The number of bullish hedge fund bets increased by 25 in recent months. Root, Inc. (NASDAQ:ROOT) was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2020. Our calculations also showed that ROOT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Today there are tons of formulas market participants put to use to analyze their stock investments. A duo of the best formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the best fund managers can trounce their index-focused peers by a superb margin (see the details here).

Lei Zhang of Hillhouse Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Keeping this in mind we’re going to take a peek at the recent hedge fund action regarding Root, Inc. (NASDAQ:ROOT).

Do Hedge Funds Think ROOT Is A Good Stock To Buy Now?

At Q4’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25 from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in ROOT a year ago. 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 Root, Inc. (NASDAQ:ROOT) was held by Silver Lake Partners, which reported holding $145.5 million worth of stock at the end of December. It was followed by Coatue Management with a $71.5 million position. Other investors bullish on the company included Valiant Capital, Hillhouse Capital Management, and Centerbridge Partners. In terms of the portfolio weights assigned to each position Centerbridge Partners allocated the biggest weight to Root, Inc. (NASDAQ:ROOT), around 3.05% of its 13F portfolio. Valiant Capital is also relatively very bullish on the stock, setting aside 2 percent of its 13F equity portfolio to ROOT.

Now, key money managers have jumped into Root, Inc. (NASDAQ:ROOT) headfirst. Silver Lake Partners, managed by Jim Davidson, Dave Roux and Glenn Hutchins, created the largest position in Root, Inc. (NASDAQ:ROOT). Silver Lake Partners had $145.5 million invested in the company at the end of the quarter. Philippe Laffont’s Coatue Management also initiated a $71.5 million position during the quarter. The other funds with new positions in the stock are Christopher R. Hansen’s Valiant Capital, Lei Zhang’s Hillhouse Capital Management, and Mark T. Gallogly’s Centerbridge Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Root, Inc. (NASDAQ:ROOT) but similarly valued. We will take a look at Switch, Inc. (NYSE:SWCH), Valley National Bancorp (NASDAQ:VLY), Wingstop Inc (NASDAQ:WING), WESCO International, Inc. (NYSE:WCC), Agora, Inc. (NASDAQ:API), Millicom International Cellular S.A. (NASDAQ:TIGO), and Cardlytics, Inc. (NASDAQ:CDLX). This group of stocks’ market valuations are closest to ROOT’s market valuation.

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As you can see these stocks had an average of 19.7 hedge funds with bullish positions and the average amount invested in these stocks was $511 million. That figure was $452 million in ROOT’s case. Cardlytics, Inc. (NASDAQ:CDLX) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 6 bullish hedge fund positions. Root, Inc. (NASDAQ:ROOT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ROOT is 68.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately ROOT wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on ROOT were disappointed as the stock returned -35.1% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

Disclosure: None. This article was originally published at Insider Monkey.