In this article you are going to find out whether hedge funds think Ross Stores, Inc. (NASDAQ:ROST) 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 ROST stock a buy or sell? Ross Stores, Inc. (NASDAQ:ROST) was in 57 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 50. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ROST has seen an increase in support from the world’s most elite money managers recently. There were 46 hedge funds in our database with ROST holdings at the end of September. Our calculations also showed that ROST isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Richard Gerson of Falcon Edge Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage (or at the end of this article). With all of this in mind let’s view the fresh hedge fund action encompassing Ross Stores, Inc. (NASDAQ:ROST).
Do Hedge Funds Think ROST Is A Good Stock To Buy Now?
At fourth quarter’s end, a total of 57 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the previous quarter. By comparison, 48 hedge funds held shares or bullish call options in ROST a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in Ross Stores, Inc. (NASDAQ:ROST), which was worth $205.9 million at the end of the fourth quarter. On the second spot was Alkeon Capital Management which amassed $193 million worth of shares. Suvretta Capital Management, Falcon Edge Capital, and Hound Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 11 Capital Partners allocated the biggest weight to Ross Stores, Inc. (NASDAQ:ROST), around 7.19% of its 13F portfolio. Masterton Capital Management is also relatively very bullish on the stock, setting aside 5.89 percent of its 13F equity portfolio to ROST.
Now, key hedge funds were breaking ground themselves. Alkeon Capital Management, managed by Panayotis Takis Sparaggis, created the most valuable position in Ross Stores, Inc. (NASDAQ:ROST). Alkeon Capital Management had $193 million invested in the company at the end of the quarter. Alexander Mitchell’s Scopus Asset Management also initiated a $58.3 million position during the quarter. The following funds were also among the new ROST investors: Jack Woodruff’s Candlestick Capital Management, Jason McDougall’s 11 Capital Partners, and Louis Bacon’s Moore Global Investments.
Let’s go over hedge fund activity in other stocks similar to Ross Stores, Inc. (NASDAQ:ROST). We will take a look at Twitter Inc (NYSE:TWTR), TAL Education Group (NYSE:TAL), Marriott International Inc (NYSE:MAR), Enterprise Products Partners L.P. (NYSE:EPD), ConocoPhillips (NYSE:COP), General Dynamics Corporation (NYSE:GD), and IDEXX Laboratories, Inc. (NASDAQ:IDXX). This group of stocks’ market valuations are similar to ROST’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TWTR | 78 | 2777387 | 3 |
| TAL | 29 | 1970456 | -12 |
| MAR | 58 | 3421401 | 2 |
| EPD | 30 | 316886 | 0 |
| COP | 49 | 687393 | 4 |
| GD | 40 | 4955250 | 3 |
| IDXX | 46 | 2697821 | 5 |
| Average | 47.1 | 2403799 | 0.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 47.1 hedge funds with bullish positions and the average amount invested in these stocks was $2404 million. That figure was $1309 million in ROST’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand TAL Education Group (NYSE:TAL) is the least popular one with only 29 bullish hedge fund positions. Ross Stores, Inc. (NASDAQ:ROST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ROST is 68.6. 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 5.3% in 2021 through March 19th and beat the market again by 0.8 percentage points. Unfortunately ROST wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on ROST were disappointed as the stock returned -1% since the end of December (through 3/19) 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.
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Disclosure: None. This article was originally published at Insider Monkey.
