Is T. Rowe Price Group, Inc. (TROW) A Good Stock To Buy?

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.

T. Rowe Price Group, Inc. (NASDAQ:TROW) investors should pay attention to a decrease in hedge fund interest recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as St. Jude Medical, Inc. (NYSE:STJ), Analog Devices, Inc. (NASDAQ:ADI), and Spectra Energy Corp. (NYSE:SE) to gather more data points.

If you’d ask most market participants, hedge funds are assumed to be underperforming, outdated investment tools of years past. While there are more than 8000 funds trading at the moment, Our experts look at the upper echelon of this group, around 700 funds. These money managers preside over most of the smart money’s total capital, and by watching their highest performing picks, Insider Monkey has come up with a few investment strategies that have historically outrun the broader indices. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, we’re going to analyze the fresh action regarding T. Rowe Price Group, Inc. (NASDAQ:TROW).

What does the smart money think about T. Rowe Price Group, Inc. (NASDAQ:TROW)?

At the Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Generation Investment Management, led by David Blood and Al Gore, holds the largest position in T. Rowe Price Group, Inc. (NASDAQ:TROW). Generation Investment Management has a $260 million position in the stock, comprising 3.8% of its 13F portfolio. Sitting at the No. 2 spot is Select Equity Group, led by Robert Joseph Caruso, holding a $53.5 million position; 0.5% of its 13F portfolio is allocated to the company. Some other professional money managers that hold long positions encompass David Harding’s Winton Capital Management, Tom Gayner’s Markel Gayner Asset Management and Cliff Asness’ AQR Capital Management.

Since T. Rowe Price Group, Inc. (NASDAQ:TROW) has experienced falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of funds that decided to sell off their positions entirely heading into Q4. Intriguingly, Matthew Tewksbury’s Stevens Capital Management said goodbye to the largest stake of the “upper crust” of funds watched by Insider Monkey, worth close to $5.9 million in stock, and Louis Bacon’s Moore Global Investments was right behind this move, as the fund sold off about $5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 3 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as T. Rowe Price Group, Inc. (NASDAQ:TROW) but similarly valued. We will take a look at St. Jude Medical, Inc. (NYSE:STJ), Analog Devices, Inc. (NASDAQ:ADI), Spectra Energy Corp. (NYSE:SE), and Tyson Foods, Inc. (NYSE:TSN). All of these stocks’ market caps are similar to TROW’s market cap.

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 $936 million. That figure was $516 million in TROW’s case. Tyson Foods, Inc. (NYSE:TSN) is the most popular stock in this table, while Spectra Energy Corp. (NYSE:SE) is the least popular one with only 24 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TSN might be a better candidate to consider a long position.