Should You Buy Ross Stores, Inc. (ROST)?

Is Ross Stores, Inc. (NASDAQ:ROST) a buy, sell, or hold? Hedge funds are getting more bullish. The number of long hedge fund bets improved by 2 in recent months.

If you’d ask most market participants, hedge funds are perceived as slow, old financial tools of years past. While there are greater than 8000 funds trading at the moment, we at Insider Monkey choose to focus on the masters of this group, around 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total asset base, and by keeping an eye on their highest performing picks, we have revealed a few investment strategies that have historically outstripped the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Equally as important, positive insider trading activity is a second way to parse down the world of equities. As the old adage goes: there are a number of stimuli for a bullish insider to downsize shares of his or her company, but only one, very simple reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the market-beating potential of this strategy if investors know what to do (learn more here).

Now, let’s take a glance at the recent action encompassing Ross Stores, Inc. (NASDAQ:ROST).

What have hedge funds been doing with Ross Stores, Inc. (NASDAQ:ROST)?

Heading into Q2, a total of 34 of the hedge funds we track were long in this stock, a change of 6% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially.

According to our comprehensive database, Charles Akre’s Akre Capital Management had the largest position in Ross Stores, Inc. (NASDAQ:ROST), worth close to $117.4 million, accounting for 6.6% of its total 13F portfolio. Sitting at the No. 2 spot is Steven Cohen of SAC Capital Advisors, with a $109.2 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other hedgies that hold long positions include Patrick McCormack’s Tiger Consumer Management, Clint Carlson’s Carlson Capital and Ken Griffin’s Citadel Investment Group.

Consequently, key money managers have been driving this bullishness. Tiger Consumer Management, managed by Patrick McCormack, assembled the most valuable position in Ross Stores, Inc. (NASDAQ:ROST). Tiger Consumer Management had 76.9 million invested in the company at the end of the quarter. Curtis Macnguyen’s Ivory Capital (Investment Mgmt) also initiated a $18.8 million position during the quarter. The other funds with new positions in the stock are Steven Cohen’s SAC Capital Advisors, Matthew Knauer and Mina Faltas’s Nokota Management, and Dmitry Balyasny’s Balyasny Asset Management.

How have insiders been trading Ross Stores, Inc. (NASDAQ:ROST)?

Insider buying is most useful when the company in question has experienced transactions within the past half-year. Over the latest half-year time frame, Ross Stores, Inc. (NASDAQ:ROST) has experienced zero unique insiders buying, and 7 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Ross Stores, Inc. (NASDAQ:ROST). These stocks are Urban Outfitters, Inc. (NASDAQ:URBN), The Gap Inc. (NYSE:GPS), Nordstrom, Inc. (NYSE:JWN), Michael Kors Holdings Ltd (NYSE:KORS), and Limited Brands, Inc. (NYSE:LTD). All of these stocks are in the apparel stores industry and their market caps match ROST’s market cap.