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Hedge Funds Have Never Been This Bullish On iRobot Corporation (IRBT)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards iRobot Corporation (NASDAQ:IRBT).

Is iRobot Corporation (NASDAQ:IRBT) a buy right now? Investors who are in the know are getting more bullish. The number of long hedge fund bets advanced by 6 recently. Our calculations also showed that IRBT 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). IRBT was in 19 hedge funds’ portfolios at the end of March. There were 13 hedge funds in our database with IRBT positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 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.

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 let’s view the key hedge fund action regarding iRobot Corporation (NASDAQ:IRBT).

Hedge fund activity in iRobot Corporation (NASDAQ:IRBT)

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 46% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in IRBT a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Is IRBT A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in iRobot Corporation (NASDAQ:IRBT). Citadel Investment Group has a $18.3 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $8.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions consist of D. E. Shaw’s D E Shaw, Lee Ainslie’s Maverick Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Maverick Capital allocated the biggest weight to iRobot Corporation (NASDAQ:IRBT), around 0.15% of its 13F portfolio. TwinBeech Capital is also relatively very bullish on the stock, earmarking 0.15 percent of its 13F equity portfolio to IRBT.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Two Sigma Advisors, managed by John Overdeck and David Siegel, established the most valuable position in iRobot Corporation (NASDAQ:IRBT). Two Sigma Advisors had $8.7 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $6.3 million position during the quarter. The following funds were also among the new IRBT investors: Israel Englander’s Millennium Management, Prem Watsa’s Fairfax Financial Holdings, and Greg Eisner’s Engineers Gate Manager.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as iRobot Corporation (NASDAQ:IRBT) but similarly valued. We will take a look at B&G Foods, Inc. (NYSE:BGS), Alcoa Corporation (NYSE:AA), Crocs, Inc. (NASDAQ:CROX), and Great Western Bancorp Inc (NYSE:GWB). This group of stocks’ market values resemble IRBT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BGS 13 41372 -2
AA 33 213717 3
CROX 25 302666 -11
GWB 10 12427 -7
Average 20.25 142546 -4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $38 million in IRBT’s case. Alcoa Corporation (NYSE:AA) is the most popular stock in this table. On the other hand Great Western Bancorp Inc (NYSE:GWB) is the least popular one with only 10 bullish hedge fund positions. iRobot Corporation (NASDAQ:IRBT) is not the least popular stock in this group but hedge fund interest is still below 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 13.4% in 2020 through June 22nd and still beat the market by 15.9 percentage points. A small number of hedge funds were also right about betting on IRBT as the stock returned 103.1% during the second quarter and outperformed the market by an even larger margin.

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