Hedge Funds Are Cashing Out Of Roku, Inc. (ROKU)

With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter of 2021. One of these stocks was Roku, Inc. (NASDAQ:ROKU).

Roku, Inc. (NASDAQ:ROKU) has seen a decrease in hedge fund sentiment recently. Roku, Inc. (NASDAQ:ROKU) was in 57 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 63. There were 61 hedge funds in our database with ROKU positions at the end of the second quarter. Our calculations also showed that ROKU isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Keeping this in mind let’s go over the fresh hedge fund action surrounding Roku, Inc. (NASDAQ:ROKU).

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

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

Heading into the fourth quarter of 2021, a total of 57 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. By comparison, 59 hedge funds held shares or bullish call options in ROKU a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Roku, Inc. (NASDAQ:ROKU) was held by ARK Investment Management, which reported holding $1484.6 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $988.6 million position. Other investors bullish on the company included Whale Rock Capital Management, Citadel Investment Group, and Steadfast Capital Management. In terms of the portfolio weights assigned to each position Kuvari Partners allocated the biggest weight to Roku, Inc. (NASDAQ:ROKU), around 30.25% of its 13F portfolio. Ogborne Capital is also relatively very bullish on the stock, setting aside 20.32 percent of its 13F equity portfolio to ROKU.

Due to the fact that Roku, Inc. (NASDAQ:ROKU) has experienced a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of hedge funds that slashed their entire stakes last quarter. Intriguingly, John Overdeck and David Siegel’s Two Sigma Advisors dropped the biggest stake of all the hedgies monitored by Insider Monkey, valued at about $373.8 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $189.7 million worth. These moves are important to note, as total hedge fund interest fell by 4 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Roku, Inc. (NASDAQ:ROKU) but similarly valued. We will take a look at Schlumberger Limited. (NYSE:SLB), Lucid Group Inc. (NASDAQ:LCID), Trane Technologies plc (NYSE:TT), Digital Realty Trust, Inc. (NYSE:DLR), Walgreens Boots Alliance Inc (NASDAQ:WBA), Pioneer Natural Resources Company (NYSE:PXD), and American Electric Power Company, Inc. (NASDAQ:AEP). All of these stocks’ market caps resemble ROKU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLB 39 1062933 -2
LCID 18 432623 18
TT 39 1147583 2
DLR 28 253530 -2
WBA 37 850173 -4
PXD 48 958649 3
AEP 36 751595 7
Average 35 779584 3.1

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 $780 million. That figure was $2829 million in ROKU’s case. Pioneer Natural Resources Company (NYSE:PXD) is the most popular stock in this table. On the other hand Lucid Group Inc. (NASDAQ:LCID) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Roku, Inc. (NASDAQ:ROKU) is more popular among hedge funds. Our overall hedge fund sentiment score for ROKU is 78.1. 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. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately ROKU wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ROKU were disappointed as the stock returned -27.4% since the end of the third quarter (through 11/30) 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 most of these stocks already outperformed the market since 2019.

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