Did The Smart Money Get T. Rowe Price Group, Inc. (TROW) Right?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding T. Rowe Price Group, Inc. (NASDAQ:TROW) and determine whether hedge funds had an edge regarding this stock.

Is T. Rowe Price Group, Inc. (NASDAQ:TROW) worth your attention right now? Investors who are in the know were turning bullish. The number of long hedge fund positions increased by 11 in recent months. T. Rowe Price Group, Inc. (NASDAQ:TROW) was in 35 hedge funds’ portfolios at the end of September. The all time high for this statistic is 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that TROW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

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 take a glance at the new hedge fund action regarding T. Rowe Price Group, Inc. (NASDAQ:TROW).

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

At the end of the third quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 46% from the previous quarter. By comparison, 34 hedge funds held shares or bullish call options in TROW a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

Is TROW A Good Stock To Buy?

The largest stake in T. Rowe Price Group, Inc. (NASDAQ:TROW) was held by AQR Capital Management, which reported holding $144.5 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $93.4 million position. Other investors bullish on the company included Markel Gayner Asset Management, Marshall Wace LLP, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Verdad Advisers allocated the biggest weight to T. Rowe Price Group, Inc. (NASDAQ:TROW), around 1.35% of its 13F portfolio. Markel Gayner Asset Management is also relatively very bullish on the stock, setting aside 0.78 percent of its 13F equity portfolio to TROW.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, initiated the most valuable position in T. Rowe Price Group, Inc. (NASDAQ:TROW). ExodusPoint Capital had $5.6 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $5.2 million position during the quarter. The other funds with brand new TROW positions are Donald Sussman’s Paloma Partners, Israel Englander’s Millennium Management, and Donald Sussman’s Paloma Partners.

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 Kimberly Clark Corporation (NYSE:KMB), L3Harris Technologies, Inc. (NASDAQ:LHX), Veeva Systems Inc (NYSE:VEEV), Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), Datadog, Inc. (NASDAQ:DDOG), Amphenol Corporation (NYSE:APH), and Lloyds Banking Group PLC (NYSE:LYG). This group of stocks’ market valuations match TROW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KMB 28 410445 -9
LHX 29 492448 -13
VEEV 44 1631737 0
BBVA 10 310429 1
DDOG 62 4934612 6
APH 26 897948 -13
LYG 8 16143 0
Average 29.6 1241966 -4

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $1242 million. That figure was $472 million in TROW’s case. Datadog, Inc. (NASDAQ:DDOG) is the most popular stock in this table. On the other hand Lloyds Banking Group PLC (NYSE:LYG) is the least popular one with only 8 bullish hedge fund positions. T. Rowe Price Group, Inc. (NASDAQ:TROW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TROW is 65. 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, TROW wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TROW were disappointed as the stock returned -21% 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.