In this article we are going to use hedge fund sentiment as a tool and determine whether Roblox Corporation (NYSE:RBLX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Roblox Corporation (NYSE:RBLX) ready to rally soon? Money managers were getting more optimistic. The number of bullish hedge fund positions increased by 3 recently. Roblox Corporation (NYSE:RBLX) was in 49 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 46. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that RBLX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In today’s marketplace there are tons of methods shareholders have at their disposal to evaluate stocks. A duo of the less utilized methods are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top investment managers can outperform the market by a significant margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.
Brad Gerstner of Altimeter Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining 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. Now let’s take a look at the key hedge fund action surrounding Roblox Corporation (NYSE:RBLX).
Do Hedge Funds Think RBLX Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards RBLX over the last 24 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Tiger Global Management LLC held the most valuable stake in Roblox Corporation (NYSE:RBLX), which was worth $2464.8 million at the end of the second quarter. On the second spot was Coatue Management which amassed $580.8 million worth of shares. Whale Rock Capital Management, Altimeter Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ariose Capital allocated the biggest weight to Roblox Corporation (NYSE:RBLX), around 16.47% of its 13F portfolio. Himension Capital is also relatively very bullish on the stock, earmarking 16.35 percent of its 13F equity portfolio to RBLX.
Now, specific money managers were breaking ground themselves. Coatue Management, managed by Philippe Laffont, assembled the largest position in Roblox Corporation (NYSE:RBLX). Coatue Management had $580.8 million invested in the company at the end of the quarter. Alex Sacerdote’s Whale Rock Capital Management also made a $390.2 million investment in the stock during the quarter. The following funds were also among the new RBLX investors: Renaissance Technologies, Richard Driehaus’s Driehaus Capital, 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 Roblox Corporation (NYSE:RBLX) but similarly valued. We will take a look at Canadian Pacific Railway Limited (NYSE:CP), Canadian Imperial Bank of Commerce (NYSE:CM), Dollar General Corp. (NYSE:DG), Ferrari N.V. (NYSE:RACE), Newmont Corporation (NYSE:NEM), Pinterest, Inc. (NYSE:PINS), and Keurig Dr Pepper Inc. (NASDAQ:KDP). This group of stocks’ market values match RBLX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CP | 25 | 6353608 | -8 |
| CM | 15 | 382874 | 1 |
| DG | 45 | 1647046 | -7 |
| RACE | 27 | 992822 | 1 |
| NEM | 55 | 1255898 | 12 |
| PINS | 63 | 2915471 | -20 |
| KDP | 28 | 1197414 | -2 |
| Average | 36.9 | 2106448 | -3.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.9 hedge funds with bullish positions and the average amount invested in these stocks was $2106 million. That figure was $4915 million in RBLX’s case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand Canadian Imperial Bank of Commerce (NYSE:CM) is the least popular one with only 15 bullish hedge fund positions. Roblox Corporation (NYSE:RBLX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for RBLX is 73.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 29.6% in 2021 through November 5th and beat the market again by 3.1 percentage points. Unfortunately RBLX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on RBLX were disappointed as the stock returned -13.3% since the end of June (through 11/5) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
