Is Rockwell Automation Inc. (NYSE:ROK) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Rockwell Automation Inc. (NYSE:ROK) has experienced an increase in enthusiasm from smart money of late. Our calculations also showed that ROK isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most stock holders, hedge funds are perceived as unimportant, old investment tools of yesteryear. While there are over 8000 funds with their doors open today, We choose to focus on the aristocrats of this group, around 750 funds. These hedge fund managers orchestrate the majority of the hedge fund industry’s total capital, and by keeping an eye on their highest performing picks, Insider Monkey has figured out many investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship hedge fund strategy surpassed the S&P 500 index by around 5 percentage points per annum since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to check out the key hedge fund action regarding Rockwell Automation Inc. (NYSE:ROK).
What does smart money think about Rockwell Automation Inc. (NYSE:ROK)?
At Q2’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the first quarter of 2019. On the other hand, there were a total of 30 hedge funds with a bullish position in ROK a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Nitorum Capital held the most valuable stake in Rockwell Automation Inc. (NYSE:ROK), which was worth $66.9 million at the end of the second quarter. On the second spot was Two Sigma Advisors which amassed $62.9 million worth of shares. Moreover, Renaissance Technologies, Citadel Investment Group, and GAMCO Investors were also bullish on Rockwell Automation Inc. (NYSE:ROK), allocating a large percentage of their portfolios to this stock.
Consequently, specific money managers have jumped into Rockwell Automation Inc. (NYSE:ROK) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the most valuable position in Rockwell Automation Inc. (NYSE:ROK). Citadel Investment Group had $39.8 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $33.3 million investment in the stock during the quarter. The following funds were also among the new ROK investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ian Simm’s Impax Asset Management, and Paul Cantor, Joseph Weiss, and Will Wurm’s Beech Hill Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Rockwell Automation Inc. (NYSE:ROK) but similarly valued. These stocks are CGI Inc. (NYSE:GIB), Best Buy Co., Inc. (NYSE:BBY), Smith & Nephew plc (NYSE:SNN), and Liberty Broadband Corp (NASDAQ:LBRDK). This group of stocks’ market valuations match ROK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GIB | 14 | 311851 | -4 |
| BBY | 31 | 991291 | -4 |
| SNN | 14 | 318986 | 1 |
| LBRDK | 40 | 3455587 | 1 |
| Average | 24.75 | 1269429 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $1269 million. That figure was $423 million in ROK’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 14 bullish hedge fund positions. Rockwell Automation Inc. (NYSE:ROK) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ROK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ROK were disappointed as the stock returned 1.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
