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. We at Insider Monkey have plowed through 887 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Roku, Inc. (NASDAQ:ROKU).
Is ROKU stock a buy or sell? Investors who are in the know were becoming hopeful. The number of long hedge fund positions inched up by 1 recently. Roku, Inc. (NASDAQ:ROKU) was in 60 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 59. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ROKU isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 59 hedge funds in our database with ROKU holdings at the end of September.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 124 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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. 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 homepage (or at the end of this article). With all of this in mind let’s take a glance at the key hedge fund action regarding Roku, Inc. (NASDAQ:ROKU).
Do Hedge Funds Think ROKU Is A Good Stock To Buy Now?
At Q4’s end, a total of 60 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ROKU over the last 22 quarters. So, let’s find 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, Catherine D. Wood’s ARK Investment Management has the number one position in Roku, Inc. (NASDAQ:ROKU), worth close to $1.7852 billion, corresponding to 4.8% of its total 13F portfolio. The second most bullish fund manager is D E Shaw, led by D. E. Shaw, holding a $301.8 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Renaissance Technologies, Israel Englander’s Millennium Management and Mike Ogborne’s Ogborne Capital. In terms of the portfolio weights assigned to each position Ogborne Capital allocated the biggest weight to Roku, Inc. (NASDAQ:ROKU), around 21.39% of its 13F portfolio. Highside Global Management is also relatively very bullish on the stock, designating 6.73 percent of its 13F equity portfolio to ROKU.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Coatue Management, managed by Philippe Laffont, created the largest position in Roku, Inc. (NASDAQ:ROKU). Coatue Management had $48.5 million invested in the company at the end of the quarter. Kenneth Tropin’s Graham Capital Management also made a $41.5 million investment in the stock during the quarter. The other funds with brand new ROKU positions are Ben Jacobs’s Anomaly Capital Management, Karim Abbadi and Edward McBride’s Centiva Capital, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.
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 Align Technology, Inc. (NASDAQ:ALGN), Electronic Arts Inc. (NASDAQ:EA), National Grid plc (NYSE:NGG), Unity Software Inc. (NYSE:U), DocuSign, Inc. (NASDAQ:DOCU), Moderna, Inc. (NASDAQ:MRNA), and American Electric Power Company, Inc. (NYSE:AEP). This group of stocks’ market valuations resemble ROKU’s market valuation.
|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 39.6 hedge funds with bullish positions and the average amount invested in these stocks was $3119 million. That figure was $3238 million in ROKU’s case. DocuSign, Inc. (NASDAQ:DOCU) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 5 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 80.4. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on ROKU, though not to the same extent, as the stock returned 4.7% since Q4 (through March 19th) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.