We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. 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 T. Rowe Price Group, Inc. (NASDAQ:TROW).
Is T. Rowe Price Group, Inc. (NASDAQ:TROW) a buy right now? Money managers are getting less optimistic. The number of long hedge fund positions were trimmed by 7 lately. Our calculations also showed that TROW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Tom Gayner of Markel Gayner Asset Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the recent hedge fund action surrounding T. Rowe Price Group, Inc. (NASDAQ:TROW).
What have hedge funds been doing with T. Rowe Price Group, Inc. (NASDAQ:TROW)?
Heading into the fourth quarter of 2019, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in TROW a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in T. Rowe Price Group, Inc. (NASDAQ:TROW) was held by AQR Capital Management, which reported holding $48.5 million worth of stock at the end of September. It was followed by Markel Gayner Asset Management with a $35.9 million position. Other investors bullish on the company included Adage Capital Management, GAMCO Investors, and Fisher Asset Management. In terms of the portfolio weights assigned to each position Qtron Investments allocated the biggest weight to T. Rowe Price Group, Inc. (NASDAQ:TROW), around 0.54% of its 13F portfolio. Markel Gayner Asset Management is also relatively very bullish on the stock, designating 0.54 percent of its 13F equity portfolio to TROW.
Seeing as T. Rowe Price Group, Inc. (NASDAQ:TROW) has witnessed declining sentiment from the smart money, we can see that there is a sect of fund managers that slashed their full holdings last quarter. Intriguingly, Usman Waheed’s Strycker View Capital sold off the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling close to $11 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund cut about $10.9 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 7 funds last quarter.
Let’s check out 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 IHS Markit Ltd. (NYSE:INFO), Hilton Worldwide Holdings Inc (NYSE:HLT), Sun Life Financial Inc. (NYSE:SLF), and Square, Inc. (NYSE:SQ). This group of stocks’ market caps match TROW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| INFO | 30 | 859361 | 2 |
| HLT | 48 | 3928940 | 4 |
| SLF | 12 | 259612 | 1 |
| SQ | 44 | 2375472 | -9 |
| Average | 33.5 | 1855846 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $1856 million. That figure was $209 million in TROW’s case. Hilton Worldwide Holdings Inc (NYSE:HLT) is the most popular stock in this table. On the other hand Sun Life Financial Inc. (NYSE:SLF) is the least popular one with only 12 bullish hedge fund positions. T. Rowe Price Group, Inc. (NASDAQ:TROW) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on TROW, though not to the same extent, as the stock returned 8.1% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
