Should You Buy Rollins, Inc. (ROL)?

Should Rollins, Inc. (NYSE:ROL) investors track the following data?

If you were to ask many of your peers, hedge funds are assumed to be overrated, outdated investment vehicles of a forgotten age. Although there are more than 8,000 hedge funds with their doors open today, Insider Monkey looks at the moguls of this club, around 525 funds. Analysts calculate that this group oversees the majority of the smart money’s total assets, and by watching their highest quality investments, we’ve deciphered a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Just as key, optimistic insider trading activity is another way to analyze the marketplace. As the old adage goes: there are a number of reasons for an executive to get rid of shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the valuable potential of this tactic if you know what to do (learn more here).

What’s more, we’re going to examine the latest info for Rollins, Inc. (NYSE:ROL).

What have hedge funds been doing with Rollins, Inc. (NYSE:ROL)?

At the end of the second quarter, a total of 13 of the hedge funds we track held long positions in this stock, a change of 30% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings considerably.

According to our 13F database, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in Rollins, Inc. (NYSE:ROL). GAMCO Investors has a $87.9 million position in the stock, comprising 0.6% of its 13F portfolio. On GAMCO Investors’s heels is Royce & Associates, managed by Chuck Royce, which held a $21.6 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Jim Simons’s Renaissance Technologies, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw.

As industrywide interest increased, specific money managers have jumped into Rollins, Inc. (NYSE:ROL) headfirst. GAMCO Investors, managed by Mario Gabelli, created the most outsized position in Rollins, Inc. (NYSE:ROL). GAMCO Investors had 87.9 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also initiated a $21.6 million position during the quarter. The other funds with brand new ROL positions are Jim Simons’s Renaissance Technologies, Ken Griffin’s Citadel Investment Group, and D. E. Shaw’s D E Shaw.

How are insiders trading Rollins, Inc. (NYSE:ROL)?

Insider buying is particularly usable when the company we’re looking at has seen transactions within the past half-year. Over the last 180-day time frame, Rollins, Inc. (NYSE:ROL) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Rollins, Inc. (NYSE:ROL). These stocks are Vantiv Inc (NYSE:VNTV), MAXIMUS, Inc. (NYSE:MMS), WEX Inc (NYSE:WXS), Global Payments Inc (NYSE:GPN), and athenahealth, Inc (NASDAQ:ATHN). All of these stocks are in the business services industry and their market caps are similar to ROL’s market cap.

Using the results explained by the previously mentioned tactics, average investors should always keep one eye on hedge fund and insider trading activity, and Rollins, Inc. (NYSE:ROL) shareholders fit into this picture quite nicely.

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