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Should I Buy Ross Stores, Inc. (ROST)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Ross Stores, Inc. (NASDAQ:ROST) based on that data and determine whether they were really smart about the stock.

Ross Stores, Inc. (NASDAQ:ROST) has experienced an increase in hedge fund interest recently. Ross Stores, Inc. (NASDAQ:ROST) was in 50 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 58. Our calculations also showed that ROST isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 market participants, hedge funds are viewed as worthless, old investment vehicles of yesteryear. While there are over 8000 funds with their doors open at present, Our experts choose to focus on the upper echelon of this club, around 850 funds. Most estimates calculate that this group of people control bulk of the smart money’s total asset base, and by following their unrivaled investments, Insider Monkey has brought to light many investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Phill Gross of Adage Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. 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 precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a look at the fresh hedge fund action surrounding Ross Stores, Inc. (NASDAQ:ROST).

What have hedge funds been doing with Ross Stores, Inc. (NASDAQ:ROST)?

At second quarter’s end, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. On the other hand, there were a total of 32 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.

More specifically, Adage Capital Management was the largest shareholder of Ross Stores, Inc. (NASDAQ:ROST), with a stake worth $138.4 million reported as of the end of September. Trailing Adage Capital Management was Citadel Investment Group, which amassed a stake valued at $103.6 million. Millennium Management, Point72 Asset Management, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Highside Global Management allocated the biggest weight to Ross Stores, Inc. (NASDAQ:ROST), around 5.79% of its 13F portfolio. Galibier Capital Management is also relatively very bullish on the stock, earmarking 4.72 percent of its 13F equity portfolio to ROST.

As one would reasonably expect, key money managers were breaking ground themselves. Junto Capital Management, managed by James Parsons, created the biggest position in Ross Stores, Inc. (NASDAQ:ROST). Junto Capital Management had $42.2 million invested in the company at the end of the quarter. Joseph Sirdevan’s Galibier Capital Management also initiated a $14.7 million position during the quarter. The other funds with brand new ROST positions are Robert Pitts’s Steadfast Capital Management, Jinghua Yan’s TwinBeech Capital, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.

Let’s check out hedge fund activity in other stocks similar to Ross Stores, Inc. (NASDAQ:ROST). These stocks are Dow Inc. (NYSE:DOW), KLA Corporation (NASDAQ:KLAC), ICICI Bank Limited (NYSE:IBN), IHS Markit Ltd. (NYSE:INFO), Canadian Imperial Bank of Commerce (NYSE:CM), EOG Resources Inc (NYSE:EOG), and Royalty Pharma plc (NASDAQ:RPRX). This group of stocks’ market values match ROST’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DOW 35 452224 -3
KLAC 37 661971 11
IBN 20 231584 -4
INFO 44 1532350 0
CM 6 158840 -4
EOG 45 696070 1
RPRX 24 2716389 24
Average 30.1 921347 3.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.1 hedge funds with bullish positions and the average amount invested in these stocks was $921 million. That figure was $767 million in ROST’s case. EOG Resources Inc (NYSE:EOG) is the most popular stock in this table. On the other hand Canadian Imperial Bank of Commerce (NYSE:CM) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Ross Stores, Inc. (NASDAQ:ROST) is more popular among hedge funds. Our overall hedge fund sentiment score for ROST is 81.9. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately ROST wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ROST were disappointed as the stock returned 6.9% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.