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Did Hedge Funds Drop The Ball On Rogers Corporation (ROG)?

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost more than 25%. Facebook, which was the second most popular stock, lost 20% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. That’s why we weren’t surprised when hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the first 2.5 months of 2019 and outperformed the broader market benchmark by 6.6 percentage points.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Hedge fund interest in Rogers Corporation (NYSE:ROG) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Focus Financial Partners Inc. (NASDAQ:FOCS), Anixter International Inc. (NYSE:AXE), and Amicus Therapeutics, Inc. (NASDAQ:FOLD) to gather more data points.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Let’s check out the fresh hedge fund action encompassing Rogers Corporation (NYSE:ROG).

Hedge fund activity in Rogers Corporation (NYSE:ROG)

At Q4’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2018. By comparison, 17 hedge funds held shares or bullish call options in ROG a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ROG Positions

The largest stake in Rogers Corporation (NYSE:ROG) was held by ACK Asset Management, which reported holding $11.8 million worth of stock at the end of September. It was followed by Royce & Associates with a $3.7 million position. Other investors bullish on the company included Skylands Capital, Renaissance Technologies, and Citadel Investment Group.

Due to the fact that Rogers Corporation (NYSE:ROG) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedge funds that slashed their full holdings in the third quarter. Intriguingly, Cliff Asness’s AQR Capital Management sold off the largest position of all the hedgies tracked by Insider Monkey, valued at about $3.8 million in stock, and Josh Goldberg’s G2 Investment Partners Management was right behind this move, as the fund dropped about $2.9 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to Rogers Corporation (NYSE:ROG). We will take a look at Focus Financial Partners Inc. (NASDAQ:FOCS), Anixter International Inc. (NYSE:AXE), Amicus Therapeutics, Inc. (NASDAQ:FOLD), and Ladder Capital Corp (NYSE:LADR). All of these stocks’ market caps match ROG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FOCS 8 170222 -4
AXE 14 222819 -3
FOLD 26 580946 -4
LADR 14 73731 -3
Average 15.5 261930 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $262 million. That figure was $21 million in ROG’s case. Amicus Therapeutics, Inc. (NASDAQ:FOLD) is the most popular stock in this table. On the other hand Focus Financial Partners Inc. (NASDAQ:FOCS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Rogers Corporation (NYSE:ROG) is even less popular than FOCS. Hedge funds clearly dropped the ball on ROG as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on ROG as the stock returned 66.9% and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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