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Hedge Funds Are Nibbling On Roku, Inc. (ROKU)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Roku, Inc. (NASDAQ:ROKU) based on that data.

Roku, Inc. (NASDAQ:ROKU) has experienced an increase in activity from the world’s largest hedge funds in recent months. 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.

In the financial world there are a multitude of formulas market participants have at their disposal to analyze publicly traded companies. Some of the most underrated formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the best hedge fund managers can trounce their index-focused peers by a healthy margin (see the details here).

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

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. With all of this in mind we’re going to take a peek at the recent hedge fund action surrounding 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. Below, you can check out the change in hedge fund sentiment towards ROKU over the last 18 quarters. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

Is ROKU A Good Stock To Buy?

The largest stake in Roku, Inc. (NASDAQ:ROKU) was held by Citadel Investment Group, which reported holding $173.7 million worth of stock at the end of September. It was followed by Laurion Capital Management with a $24.9 million position. Other investors bullish on the company included D E Shaw, Ogborne Capital, and Citadel Investment Group. 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, designating 8.19 percent of its 13F equity portfolio to ROKU.

Consequently, key hedge funds were leading the bulls’ herd. Laurion Capital Management, managed by Benjamin A. Smith, assembled the most valuable 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 made a $15.4 million investment in the stock 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 take a look at 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 similar 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on ROKU as the stock returned 25.2% in Q2 (through the end of May) 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.