Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 835 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their December 31 holdings, data that is available nowhere else. Should you consider T. Rowe Price Group, Inc. (NASDAQ:TROW) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is T. Rowe Price Group, Inc. (NASDAQ:TROW) going to take off soon? Hedge funds are becoming hopeful. The number of long hedge fund bets improved by 3 in recent months. Our calculations also showed that TROW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). TROW was in 27 hedge funds’ portfolios at the end of December. There were 24 hedge funds in our database with TROW holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Tom Gayner of Markel Gayner Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the recent hedge fund action regarding T. Rowe Price Group, Inc. (NASDAQ:TROW).
Hedge fund activity in T. Rowe Price Group, Inc. (NASDAQ:TROW)
At the end of the fourth quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in TROW over the last 18 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the biggest position in T. Rowe Price Group, Inc. (NASDAQ:TROW). AQR Capital Management has a $61.4 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Markel Gayner Asset Management, managed by Tom Gayner, which holds a $38.3 million position; 0.5% of its 13F portfolio is allocated to the company. Remaining peers that are bullish comprise Phill Gross and Robert Atchinson’s Adage Capital Management, Mario Gabelli’s GAMCO Investors and Noam Gottesman’s GLG Partners. In terms of the portfolio weights assigned to each position Markel Gayner Asset Management allocated the biggest weight to T. Rowe Price Group, Inc. (NASDAQ:TROW), around 0.53% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, dishing out 0.48 percent of its 13F equity portfolio to TROW.
Now, key money managers have jumped into T. Rowe Price Group, Inc. (NASDAQ:TROW) headfirst. Bridgewater Associates, managed by Ray Dalio, established the largest position in T. Rowe Price Group, Inc. (NASDAQ:TROW). Bridgewater Associates had $5.9 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $4.6 million investment in the stock during the quarter. The other funds with brand new TROW positions are Schonfeld Strategic Advisors, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as T. Rowe Price Group, Inc. (NASDAQ:TROW) but similarly valued. These stocks are Mercadolibre Inc (NASDAQ:MELI), PT Telekomunikasi Indonesia (NYSE:TLK), KLA Corporation (NASDAQ:KLAC), and AutoZone, Inc. (NYSE:AZO). This group of stocks’ market values resemble TROW’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MELI | 52 | 2809834 | 4 |
| TLK | 8 | 210873 | 0 |
| KLAC | 30 | 700266 | -2 |
| AZO | 40 | 1597360 | 0 |
| Average | 32.5 | 1329583 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $1330 million. That figure was $216 million in TROW’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand PT Telekomunikasi Indonesia (NYSE:TLK) is the least popular one with only 8 bullish hedge fund positions. T. Rowe Price Group, Inc. (NASDAQ:TROW) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately TROW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); TROW investors were disappointed as the stock returned -22.9% during the same time period 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
