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Did Hedge Funds Make The Right Call On Roku, Inc. (ROKU) ?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtRoku, Inc. (NASDAQ:ROKU) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Roku, Inc. (NASDAQ:ROKU) worth your attention right now? Investors who are in the know were buying. The number of long hedge fund positions inched up by 1 lately. Our calculations also showed that ROKU isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most traders, hedge funds are seen as worthless, outdated financial tools of years past. While there are greater than 8000 funds with their doors open at present, Our researchers choose to focus on the masters of this group, approximately 850 funds. These investment experts shepherd most of the hedge fund industry’s total asset base, and by shadowing their inimitable picks, Insider Monkey has determined various investment strategies that have historically outstripped Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Sander Gerber of Hudson Bay Capital

Sander Gerber of Hudson Bay Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the recent hedge fund action regarding Roku, Inc. (NASDAQ:ROKU).

What have hedge funds been doing with Roku, Inc. (NASDAQ:ROKU)?

At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. On the other hand, there were a total of 33 hedge funds with a bullish position in ROKU 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.

Is ROKU A Good Stock To Buy?

Among these funds, Citadel Investment Group held the most valuable stake in Roku, Inc. (NASDAQ:ROKU), which was worth $173.7 million at the end of the third quarter. On the second spot was Laurion Capital Management which amassed $24.9 million worth of shares. D E Shaw, Ogborne Capital, 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 Ogborne Capital allocated the biggest weight to Roku, Inc. (NASDAQ:ROKU), around 22.49% of its 13F portfolio. Empirical Capital Partners is also relatively very bullish on the stock, earmarking 8.19 percent of its 13F equity portfolio to ROKU.

As aggregate interest increased, key money managers were breaking ground themselves. Laurion Capital Management, managed by Benjamin A. Smith, established the biggest position in Roku, Inc. (NASDAQ:ROKU). Laurion Capital Management had $24.9 million invested in the company at the end of the quarter. Joel Ramin’s 12 West Capital Management also initiated a $15.4 million position during the quarter. The other funds with new positions in the stock are Scott Stewart Miller’s Greenhaven Road Investment Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Roku, Inc. (NASDAQ:ROKU) but similarly valued. These stocks are Bio-Rad Laboratories, Inc. (NYSE:BIO), Equity Lifestyle Properties, Inc. (NYSE:ELS), DISH Network Corp. (NASDAQ:DISH), and POSCO (NYSE:PKX). This group of stocks’ market valuations are closest to ROKU’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BIO 39 874653 -5
ELS 31 452058 8
DISH 44 862996 3
PKX 11 40514 1
Average 31.25 557555 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $558 million. That figure was $182 million in ROKU’s case. DISH Network Corp. (NASDAQ:DISH) is the most popular stock in this table. On the other hand POSCO (NYSE:PKX) is the least popular one with only 11 bullish hedge fund positions. Roku, Inc. (NASDAQ:ROKU) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on ROKU as the stock returned 33.2% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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