Should You Buy Rockwell Automation (ROK)?

At Insider Monkey we follow around 730 of the best-performing investors and even though many of them lost money in the last several months, the history teaches us that over the long-run they still manage to beat the market, which is why it can be profitable for us to imitate their activity. Of course, even the best money managers can sometimes get it wrong, but following some of their picks gives us a better chance to outperform the crowd than picking a random stock and this is where our research comes in.

Rockwell Automation (NYSE:ROK) was in 34 hedge funds’ portfolios at the end of the third quarter of 2015. ROK investors should pay attention to an increase in support from the world’s most elite money managers in recent months. There were 28 hedge funds in our database with ROK holdings at the end of the previous quarter. At the end of this article we will also compare ROK to other stocks including Seagate Technology PLC (NASDAQ:STX), Molson Coors Brewing Company (NYSE:TAP), and Nordstrom, Inc. (NYSE:JWN) to get a better sense of its popularity.

Now, let’s go over the latest action encompassing Rockwell Automation (NYSE:ROK).

What have hedge funds been doing with Rockwell Automation (NYSE:ROK)?

At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Generation Investment Management, managed by David Blood and Al Gore, holds the most valuable position in Rockwell Automation (NYSE:ROK). Generation Investment Management has a $82 million position in the stock, comprising 1.2% of its 13F portfolio. On Generation Investment Management’s heels is Legg Mason Capital Management, led by Bill Miller, holding a $75.5 million position; 1.5% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include Joel Greenblatt’s Gotham Asset Management, Jim Simons’ Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Generation Investment Management, managed by David Blood and Al Gore, created the biggest position in Rockwell Automation (NYSE:ROK). Generation Investment Management had $82 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $24 million position during the quarter. The other funds with brand new ROK positions are David Harding’s Winton Capital Management, Dmitry Balyasny’s Balyasny Asset Management, and D. E. Shaw’s D E Shaw.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Rockwell Automation (NYSE:ROK) but similarly valued. These stocks are Seagate Technology PLC (NASDAQ:STX), Molson Coors Brewing Company (NYSE:TAP), Nordstrom, Inc. (NYSE:JWN), and WestRock Co (NYSE:WRK). All of these stocks’ market caps are closest to ROK’s market cap.

As you can see these stocks had an average of 45.25 hedge funds with bullish positions and the average amount invested in these stocks was $1469 million. That figure was $555 million in ROK’s case. Molson Coors Brewing Company (NYSE:TAP) is the most popular stock in this table. On the other hand Seagate Technology PLC (NASDAQ:STX) is the least popular one with only 31 bullish hedge fund positions. Rockwell Automation (NYSE:ROK) 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 TAP might be a better candidate to consider a long position.