Is Ross Stores, Inc. (ROST) Worthy of Your Portfolio?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ross Stores, Inc. (NASDAQ:ROST).

So, is Ross Stores, Inc. (NASDAQ:ROST) a healthy stock for your portfolio? Investors who are in the know seem to be getting more bullish. The number of bullish hedge fund bets rose by four during the third quarter. In this way, there were 39 investors tracked by Insider Monkey long the stock at the end of September. At the end of this article we will also compare ROST to other stocks including Hilton Worldwide Holdings Inc (NYSE:HLT), Weyerhaeuser Company (NYSE:WY), and Dollar Tree, Inc. (NASDAQ:DLTR) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, let’s take a peek at the new action regarding Ross Stores, Inc. (NASDAQ:ROST).

What have hedge funds been doing with Ross Stores, Inc. (NASDAQ:ROST)?

A total of 39 funds tracked by Insider Monkey were bullish on Ross Stores at the end of the third quarter, which represents an increase of 11% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, East Side Capital (RR Partners), managed by Steven Richman, holds the biggest position in Ross Stores, Inc. (NASDAQ:ROST). East Side Capital (RR Partners) has a $218 million position in the stock, comprising 10.6% of its 13F portfolio. On East Side Capital (RR Partners)’s heels is John Overdeck and David Siegel’s Two Sigma Advisors, with a $124.2 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish contain Cliff Asness’ AQR Capital Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Phill Gross and Robert Atchinson’s Adage Capital Management.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the biggest position in Ross Stores, Inc. (NASDAQ:ROST). Two Sigma Advisors had $124.2 million invested in the company at the end of the quarter. Robert Pohly’s Samlyn Capital also initiated a $31.5 million position during the quarter. The other funds with new positions in the stock are James Parsons’ Junto Capital Management, Louis Bacon’s Moore Global Investments, and Ken Griffin’s Citadel Investment Group.

Let’s now take a look at hedge fund activity in other stocks similar to Ross Stores, Inc. (NASDAQ:ROST). These stocks are Hilton Worldwide Holdings Inc (NYSE:HLT), Weyerhaeuser Company (NYSE:WY), Dollar Tree, Inc. (NASDAQ:DLTR), and St. Jude Medical, Inc. (NYSE:STJ). This group of stocks’ market caps are similar to ROST’s market cap.

As you can see these stocks had an average of 45 funds holding long positions and the average amount invested in these stocks was $2.69 billion at the end of September. That figure was $811 million in ROST’s case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table, while Weyerhaeuser Company (NYSE:WY) is the least popular one with only 27 bullish hedge fund positions. Ross Stores, Inc. (NASDAQ:ROST) 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. In this regard Dollar Tree, Inc. (NASDAQ:DLTR) might be a better candidate to consider a long position.