Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Roku, Inc. (NASDAQ:ROKU).
Is ROKU a good stock to buy now? Roku, Inc. (NASDAQ:ROKU) was in 59 hedge funds’ portfolios at the end of September. The all time high for this statistics is 41. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ROKU investors should pay attention to an increase in enthusiasm from smart money recently. There were 41 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 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.
To most investors, hedge funds are viewed as worthless, outdated investment vehicles of the past. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the crème de la crème of this club, around 850 funds. These investment experts shepherd the majority of the hedge fund industry’s total asset base, and by watching their matchless equity investments, Insider Monkey has come up with a few investment strategies that have historically beaten the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind let’s take a look at the latest hedge fund action regarding Roku, Inc. (NASDAQ:ROKU).
How have hedgies been trading Roku, Inc. (NASDAQ:ROKU)?
At the end of September, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of 44% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ROKU over the last 21 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.
Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the number one call position in Roku, Inc. (NASDAQ:ROKU), worth close to $351.3 million, corresponding to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, managed by D. E. Shaw, which holds a $251.9 million position; 0.3% of its 13F portfolio is allocated to the company. Other professional money managers with similar optimism comprise D. E. Shaw’s D E Shaw, James Crichton’s Hitchwood Capital Management and Matthew Hulsizer’s PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Ogborne Capital allocated the biggest weight to Roku, Inc. (NASDAQ:ROKU), around 15.13% of its 13F portfolio. Ogborne Capital is also relatively very bullish on the stock, designating 11.89 percent of its 13F equity portfolio to ROKU.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Cavalry Asset Management, managed by John Hurley, initiated the most outsized position in Roku, Inc. (NASDAQ:ROKU). Cavalry Asset Management had $45 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $44.3 million position during the quarter. The other funds with new positions in the stock are Larry Chen and Terry Zhang’s Tairen Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Shashin Shah’s Think Investments.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Roku, Inc. (NASDAQ:ROKU) but similarly valued. These stocks are LyondellBasell Industries NV (NYSE:LYB), Verisign, Inc. (NASDAQ:VRSN), ZTO Express (Cayman) Inc. (NYSE:ZTO), Sirius XM Holdings Inc (NASDAQ:SIRI), Church & Dwight Co., Inc. (NYSE:CHD), Mettler-Toledo International Inc. (NYSE:MTD), and Zillow Group Inc (NASDAQ:Z). All of these stocks’ market caps are similar to ROKU’s market cap.
|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 38.7 hedge funds with bullish positions and the average amount invested in these stocks was $1830 million. That figure was $1031 million in ROKU’s case. Zillow Group Inc (NASDAQ:Z) is the most popular stock in this table. On the other hand ZTO Express (Cayman) Inc. (NYSE:ZTO) is the least popular one with only 22 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 overall hedge fund sentiment score for ROKU is 79.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Hedge funds were also right about betting on ROKU as the stock returned 49% since the end of Q3 (through 12/2) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.