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 817 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 September 30th, about a month before the elections. In this article we look at what those investors think of Ross Stores, Inc. (NASDAQ:ROST).
Is ROST a good stock to buy now? Ross Stores, Inc. (NASDAQ:ROST) investors should be aware of a decrease in hedge fund sentiment recently. Ross Stores, Inc. (NASDAQ:ROST) was in 46 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 50. There were 50 hedge funds in our database with ROST positions at the end of the second quarter. Our calculations also showed that ROST 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.
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’ 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 66 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.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis 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. Now let’s analyze the recent hedge fund action regarding Ross Stores, Inc. (NASDAQ:ROST).
Do Hedge Funds Think ROST Is A Good Stock To Buy Now?
At Q3’s end, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 44 hedge funds with a bullish position in ROST 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.
According to Insider Monkey’s hedge fund database, Point72 Asset Management, managed by Steve Cohen, holds the number one position in Ross Stores, Inc. (NASDAQ:ROST). Point72 Asset Management has a $90 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund manager is Aaron Cowen of Suvretta Capital Management, with a $71.5 million position; the fund has 1.3% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions encompass Jonathan Auerbach’s Hound Partners, Ken Griffin’s Citadel Investment Group and Renaissance Technologies. In terms of the portfolio weights assigned to each position Highside Global Management allocated the biggest weight to Ross Stores, Inc. (NASDAQ:ROST), around 5.56% of its 13F portfolio. Hound Partners is also relatively very bullish on the stock, dishing out 4.33 percent of its 13F equity portfolio to ROST.
Judging by the fact that Ross Stores, Inc. (NASDAQ:ROST) has faced declining sentiment from hedge fund managers, it’s safe to say that there is a sect of fund managers that elected to cut their full holdings heading into Q4. At the top of the heap, Michael Gelband’s ExodusPoint Capital dropped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $12 million in stock. Parvinder Thiara’s fund, Athanor Capital, also cut its stock, about $7.7 million worth. These transactions are interesting, as total hedge fund interest was cut by 4 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Ross Stores, Inc. (NASDAQ:ROST). We will take a look at Capital One Financial Corp. (NYSE:COF), Synopsys, Inc. (NASDAQ:SNPS), Mizuho Financial Group Inc. (NYSE:MFG), Amphenol Corporation (NYSE:APH), TE Connectivity Ltd. (NYSE:TEL), SYSCO Corporation (NYSE:SYY), and Cummins Inc. (NYSE:CMI). All of these stocks’ market caps are similar to ROST’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 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $1379 million. That figure was $756 million in ROST’s case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 5 bullish hedge fund positions. Ross Stores, Inc. (NASDAQ:ROST) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ROST is 75.2. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on ROST as the stock returned 21.6% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.