Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Roper Technologies Inc. (NYSE:ROP).
Is ROP a good stock to buy now? Roper Technologies Inc. (NYSE:ROP) has experienced an increase in activity from the world’s largest hedge funds recently. Roper Technologies Inc. (NYSE:ROP) was in 50 hedge funds’ portfolios at the end of September. The all time high for this statistics is 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ROP 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.
If you’d ask most stock holders, hedge funds are perceived as worthless, old financial tools of years past. While there are more than 8000 funds with their doors open at the moment, Our experts hone in on the elite of this group, about 850 funds. These money managers direct bulk of the hedge fund industry’s total asset base, and by observing their finest picks, Insider Monkey has found many investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually 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 scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 analyze the key hedge fund action encompassing Roper Technologies Inc. (NYSE:ROP).
Hedge fund activity in Roper Technologies Inc. (NYSE:ROP)
Heading into the fourth quarter of 2020, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ROP over the last 21 quarters. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Charles Akre’s Akre Capital Management has the number one position in Roper Technologies Inc. (NYSE:ROP), worth close to $756.1 million, comprising 5.3% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $87.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish include Renaissance Technologies, Dmitry Balyasny’s Balyasny Asset Management and Peter Simmie’s Bristol Gate Capital Partners. In terms of the portfolio weights assigned to each position Lansing Management allocated the biggest weight to Roper Technologies Inc. (NYSE:ROP), around 14.69% of its 13F portfolio. Akre Capital Management is also relatively very bullish on the stock, designating 5.33 percent of its 13F equity portfolio to ROP.
As aggregate interest increased, some big names have jumped into Roper Technologies Inc. (NYSE:ROP) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the largest position in Roper Technologies Inc. (NYSE:ROP). Balyasny Asset Management had $61.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $12.1 million position during the quarter. The following funds were also among the new ROP investors: Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Alexander Mitchell’s Scopus Asset Management, and Andrew Byington’s Appian Way Asset Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Roper Technologies Inc. (NYSE:ROP) but similarly valued. We will take a look at Canadian Pacific Railway Limited (NYSE:CP), Honda Motor Co Ltd (NYSE:HMC), Digital Realty Trust, Inc. (NYSE:DLR), Eaton Corporation plc (NYSE:ETN), DuPont de Nemours Inc (NYSE:DD), Baxter International Inc. (NYSE:BAX), and National Grid plc (NYSE:NGG). This group of stocks’ market values are closest to ROP’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 31.6 hedge funds with bullish positions and the average amount invested in these stocks was $1243 million. That figure was $1372 million in ROP’s case. DuPont de Nemours Inc (NYSE:DD) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 6 bullish hedge fund positions. Roper Technologies Inc. (NYSE:ROP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ROP is 80. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 beat the market again by 16 percentage points. Unfortunately ROP wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ROP were disappointed as the stock returned 5.9% since the end of September (through 12/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.