Should I Avoid Rockwell Automation Inc. (ROK)?

In this article we will check out the progression of hedge fund sentiment towards Rockwell Automation Inc. (NYSE:ROK) and determine whether it is a good investment 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 employ 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.

Is Rockwell Automation Inc. (NYSE:ROK) worth your attention right now? Hedge funds were cutting their exposure. The number of bullish hedge fund bets fell by 1 lately. Rockwell Automation Inc. (NYSE:ROK) was in 25 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 50. Our calculations also showed that ROK isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 26 hedge funds in our database with ROK positions at the end of the first quarter.

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Cliff Asness of AQR Capital Management

At Insider Monkey, we scour multiple sources to uncover 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 EV 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. Keeping this in mind let’s review the latest hedge fund action encompassing Rockwell Automation Inc. (NYSE:ROK).

Do Hedge Funds Think ROK Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ROK over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Impax Asset Management, managed by Ian Simm, holds the biggest position in Rockwell Automation Inc. (NYSE:ROK). Impax Asset Management has a $201.8 million position in the stock, comprising 0.9% of its 13F portfolio. The second most bullish fund manager is AQR Capital Management, led by Cliff Asness, holding a $58.5 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism encompass Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital, Ken Fisher’s Fisher Asset Management and Tom Gayner’s Markel Gayner Asset Management. In terms of the portfolio weights assigned to each position Shellback Capital allocated the biggest weight to Rockwell Automation Inc. (NYSE:ROK), around 2.84% of its 13F portfolio. Impax Asset Management is also relatively very bullish on the stock, earmarking 0.89 percent of its 13F equity portfolio to ROK.

Seeing as Rockwell Automation Inc. (NYSE:ROK) has experienced bearish sentiment from hedge fund managers, logic holds that there were a few funds who were dropping their positions entirely heading into Q3. Intriguingly, Alexander Mitchell’s Scopus Asset Management dumped the largest position of the “upper crust” of funds followed by Insider Monkey, worth close to $15.4 million in stock, and Robert Richards’s Heathbridge Capital Management was right behind this move, as the fund sold off about $14.7 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds heading into Q3.

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. We will take a look at Chewy, Inc. (NYSE:CHWY), Stanley Black & Decker, Inc. (NYSE:SWK), First Republic Bank (NYSE:FRC), Wayfair Inc (NYSE:W), Cloudflare, Inc. (NYSE:NET), Liberty Broadband Corp (NASDAQ:LBRDK), and STMicroelectronics N.V. (NYSE:STM). This group of stocks’ market valuations resemble ROK’s market valuation.

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As you can see these stocks had an average of 39.3 hedge funds with bullish positions and the average amount invested in these stocks was $2166 million. That figure was $536 million in ROK’s case. Liberty Broadband Corp (NASDAQ:LBRDK) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 13 bullish hedge fund positions. Rockwell Automation Inc. (NYSE:ROK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ROK is 31. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on ROK as the stock returned 11% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.