How Did Rockwell Automation Inc. (ROK) Compare Against Top Hedge Fund Stocks in 2019?

Hedge funds are known to underperform the bull markets but that’s not because they are bad at investing. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. Hedge funds underperform because they are hedged. The Standard and Poor’s 500 Total Return Index ETFs returned 31.2% last year. Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 41.3% during the same period. An average long/short hedge fund returned only a fraction of this due to the hedges they implement and the large fees they charge. Our research covering the last 18 years indicates that investors can outperform the market by imitating hedge funds’ consensus stock picks rather than directly investing in hedge funds. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Rockwell Automation Inc. (NYSE:ROK).

Rockwell Automation Inc. (NYSE:ROK) investors should be aware of a decrease in hedge fund interest lately. Our calculations also showed that ROK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

At the moment there are numerous signals market participants use to appraise their holdings. A couple of the less known signals are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the best investment managers can trounce the S&P 500 by a very impressive margin (see the details here).

Ken Griffin

Ken Griffin of Citadel Investment Group

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 read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock is still extremely cheap despite already gaining 20 percent. With all of this in mind let’s take a glance at the new hedge fund action regarding Rockwell Automation Inc. (NYSE:ROK).

What does smart money think about Rockwell Automation Inc. (NYSE:ROK)?

At Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in ROK a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ROK A Good Stock To Buy?

The largest stake in Rockwell Automation Inc. (NYSE:ROK) was held by Citadel Investment Group, which reported holding $79.7 million worth of stock at the end of September. It was followed by Millennium Management with a $57.5 million position. Other investors bullish on the company included Nitorum Capital, GAMCO Investors, and Impax Asset Management. In terms of the portfolio weights assigned to each position Albar Capital allocated the biggest weight to Rockwell Automation Inc. (NYSE:ROK), around 3.46% of its 13F portfolio. Nitorum Capital is also relatively very bullish on the stock, designating 2.68 percent of its 13F equity portfolio to ROK.

Judging by the fact that Rockwell Automation Inc. (NYSE:ROK) has faced declining sentiment from the smart money, we can see that there was a specific group of money managers that decided to sell off their full holdings heading into Q4. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the largest position of the 750 funds monitored by Insider Monkey, comprising close to $33.3 million in stock, and Ray Dalio’s Bridgewater Associates was right behind this move, as the fund dropped about $13.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 5 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Rockwell Automation Inc. (NYSE:ROK). These stocks are ORIX Corporation (NYSE:IX), Ameriprise Financial, Inc. (NYSE:AMP), The Clorox Company (NYSE:CLX), and Cincinnati Financial Corporation (NASDAQ:CINF). This group of stocks’ market caps resemble ROK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IX 4 7651 -2
AMP 27 1104619 -12
CLX 32 1004826 4
CINF 23 565077 5
Average 21.5 670543 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $671 million. That figure was $469 million in ROK’s case. The Clorox Company (NYSE:CLX) is the most popular stock in this table. On the other hand ORIX Corporation (NYSE:IX) is the least popular one with only 4 bullish hedge fund positions. Rockwell Automation Inc. (NYSE:ROK) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on ROK, though not to the same extent, as the stock returned 37.8% during 2019 and outperformed the market as well.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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