Did The Smart Money Get Ross Stores, Inc. (ROST) Right?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Ross Stores, Inc. (NASDAQ:ROST) based on that data and determine whether they were really smart about the stock.

Is Ross Stores, Inc. (NASDAQ:ROST) a bargain? Investors who are in the know were reducing their bets on the stock. The number of long hedge fund bets shrunk by 10 in recent months. Ross Stores, Inc. (NASDAQ:ROST) was in 41 hedge funds’ portfolios at the end of September. The all time high for this statistic is 57. Our calculations also showed that ROST isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 51 hedge funds in our database with ROST positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to check out the latest hedge fund action surrounding Ross Stores, Inc. (NASDAQ:ROST).

Do Hedge Funds Think ROST Is A Good Stock To Buy Now?

At third quarter’s end, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ROST over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Alkeon Capital Management held the most valuable stake in Ross Stores, Inc. (NASDAQ:ROST), which was worth $170.7 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $132.2 million worth of shares. GLG Partners, Holocene Advisors, and Suvretta Capital Management 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 Masterton Capital Management allocated the biggest weight to Ross Stores, Inc. (NASDAQ:ROST), around 8.26% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, designating 4.44 percent of its 13F equity portfolio to ROST.

Judging by the fact that Ross Stores, Inc. (NASDAQ:ROST) has faced a decline in interest from hedge fund managers, logic holds that there lies a certain “tier” of fund managers that elected to cut their entire stakes heading into Q4. Intriguingly, Anand Parekh’s Alyeska Investment Group sold off the largest position of the 750 funds followed by Insider Monkey, comprising close to $43.1 million in stock. Israel Englander’s fund, Millennium Management, also cut its stock, about $36.5 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 10 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ross Stores, Inc. (NASDAQ:ROST) but similarly valued. We will take a look at ResMed Inc. (NYSE:RMD), Republic Services, Inc. (NYSE:RSG), SVB Financial Group (NASDAQ:SIVB), The Travelers Companies Inc (NYSE:TRV), Kinder Morgan Inc (NYSE:KMI), The Allstate Corporation (NYSE:ALL), and DiDi Global Inc. (NYSE:DIDI). This group of stocks’ market values are closest to ROST’s market value.

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As you can see these stocks had an average of 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $828 million. That figure was $1220 million in ROST’s case. SVB Financial Group (NASDAQ:SIVB) is the most popular stock in this table. On the other hand DiDi Global Inc. (NYSE:DIDI) is the least popular one with only 15 bullish hedge fund positions. Ross Stores, Inc. (NASDAQ:ROST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ROST is 59.9. 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 and beat the market again by 3.6 percentage points. Unfortunately, ROST wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ROST were disappointed as the stock returned -10% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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