Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of T. Rowe Price Group, Inc. (NASDAQ:TROW).
T. Rowe Price Group, Inc. (NASDAQ:TROW) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that TROW 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a gander at the new hedge fund action encompassing T. Rowe Price Group, Inc. (NASDAQ:TROW).
How have hedgies been trading T. Rowe Price Group, Inc. (NASDAQ:TROW)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards TROW over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of T. Rowe Price Group, Inc. (NASDAQ:TROW), with a stake worth $60.9 million reported as of the end of September. Trailing AQR Capital Management was Markel Gayner Asset Management, which amassed a stake valued at $30.7 million. Adage Capital Management, Renaissance Technologies, and GLG Partners 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 Markel Gayner Asset Management allocated the biggest weight to T. Rowe Price Group, Inc. (NASDAQ:TROW), around 0.58% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, dishing out 0.49 percent of its 13F equity portfolio to TROW.
Since T. Rowe Price Group, Inc. (NASDAQ:TROW) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few fund managers that decided to sell off their full holdings last quarter. At the top of the heap, Israel Englander’s Millennium Management dropped the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $12 million in stock, and Ray Dalio’s Bridgewater Associates was right behind this move, as the fund dumped about $5.9 million worth. These transactions are interesting, as total hedge fund interest fell by 3 funds last quarter.
Let’s now take a look at 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 Verisk Analytics, Inc. (NASDAQ:VRSK), Public Service Enterprise Group Incorporated (NYSE:PEG), Motorola Solutions Inc (NYSE:MSI), and Paychex, Inc. (NASDAQ:PAYX). This group of stocks’ market valuations are closest to TROW’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $695 million. That figure was $191 million in TROW’s case. Paychex, Inc. (NASDAQ:PAYX) is the most popular stock in this table. On the other hand Verisk Analytics, Inc. (NASDAQ:VRSK) is the least popular one with only 31 bullish hedge fund positions. Compared to these stocks T. Rowe Price Group, Inc. (NASDAQ:TROW) is even less popular than VRSK. Hedge funds clearly dropped the ball on TROW as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on TROW as the stock returned 30.9% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.