Is Ross Stores, Inc. (NASDAQ:ROST) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Ross Stores, Inc. (NASDAQ:ROST) investors should pay attention to an increase in hedge fund sentiment in recent months. ROST was in 33 hedge funds’ portfolios at the end of December. There were 31 hedge funds in our database with ROST holdings at the end of the previous quarter. Our calculations also showed that ROST isn’t among the 30 most popular stocks among hedge funds.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s check out the recent hedge fund action encompassing Ross Stores, Inc. (NASDAQ:ROST).
How have hedgies been trading Ross Stores, Inc. (NASDAQ:ROST)?
At Q4’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in ROST over the last 14 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.
The largest stake in Ross Stores, Inc. (NASDAQ:ROST) was held by AQR Capital Management, which reported holding $429.4 million worth of stock at the end of September. It was followed by Alyeska Investment Group with a $91 million position. Other investors bullish on the company included Holocene Advisors, Millennium Management, and Adage Capital Management.
As aggregate interest increased, some big names have been driving this bullishness. Holocene Advisors, managed by Brandon Haley, initiated the most outsized position in Ross Stores, Inc. (NASDAQ:ROST). Holocene Advisors had $73.8 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also initiated a $22.9 million position during the quarter. The other funds with brand new ROST positions are Alexander Mitchell’s Scopus Asset Management, Lee Ainslie’s Maverick Capital, and Sara Nainzadeh’s Centenus Global Management.
Let’s now take a look at hedge fund activity in other stocks similar to Ross Stores, Inc. (NASDAQ:ROST). We will take a look at Constellation Brands, Inc. (NYSE:STZ), Ford Motor Company (NYSE:F), JD.Com Inc (NASDAQ:JD), and BT Group plc (NYSE:BT). This group of stocks’ market valuations resemble ROST’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 34.5 hedge funds with bullish positions and the average amount invested in these stocks was $1896 million. That figure was $907 million in ROST’s case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand BT Group plc (NYSE:BT) is the least popular one with only 9 bullish hedge fund positions. Ross Stores, Inc. (NASDAQ:ROST) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately ROST wasn’t in this group. Hedge funds that bet on ROST were disappointed as the stock returned 8.4% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.