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 Rockwell Automation Inc. (NYSE:ROK) based on that data and determine whether they were really smart about the stock.
Rockwell Automation Inc. (NYSE:ROK) has experienced an increase in support from the world's most elite money managers of late. Rockwell Automation Inc. (NYSE:ROK) was in 50 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 37 hedge funds in our database with ROK positions at the end of the first quarter. Our calculations also showed that ROK 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Tom Gayner
Tom Gayner of Markel Gayner Asset 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. Keeping this in mind let's view the key hedge fund action encompassing Rockwell Automation Inc. (NYSE:ROK).
How have hedgies been trading Rockwell Automation Inc. (NYSE:ROK)?
At second quarter's end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 35% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in ROK a year ago. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Impax Asset Management, managed by Ian Simm, holds the biggest position in Rockwell Automation Inc. (NYSE:ROK). Impax Asset Management has a $77 million position in the stock, comprising 0.8% of its 13F portfolio. The second largest stake is held by Aaron Cowen of Suvretta Capital Management, with a $67.1 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass Seth Rosen's Nitorum Capital, Mario Gabelli's GAMCO Investors and Tom Gayner's Markel Gayner Asset Management. In terms of the portfolio weights assigned to each position Heathbridge Capital Management allocated the biggest weight to Rockwell Automation Inc. (NYSE:ROK), around 4.27% of its 13F portfolio. Bourgeon Capital is also relatively very bullish on the stock, designating 2.75 percent of its 13F equity portfolio to ROK.
As one would reasonably expect, specific money managers have been driving this bullishness. Suvretta Capital Management, managed by Aaron Cowen, assembled the largest position in Rockwell Automation Inc. (NYSE:ROK). Suvretta Capital Management had $67.1 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $27.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Principal Global Investors's Columbus Circle Investors, Andrew Sandler's Sandler Capital Management, and Phill Gross and Robert Atchinson's Adage Capital Management.
Let's go over hedge fund activity in other stocks similar to Rockwell Automation Inc. (NYSE:ROK). We will take a look at Waste Connections, Inc. (NYSE:WCN), Telefonica S.A. (NYSE:TEF), Otis Worldwide Corporation (NYSE:OTIS), Fastenal Company (NASDAQ:FAST), Barclays PLC (NYSE:BCS), STMicroelectronics N.V. (NYSE:STM), and Nikola Corporation (NASDAQ:NKLA). This group of stocks' market values resemble ROK's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WCN,39,720610,6 TEF,6,9842,-1 OTIS,56,2110419,52 FAST,34,633636,0 BCS,8,35407,-5 STM,12,55960,1 NKLA,29,1382479,16 Average,26.3,706908,9.9 [/table]
As you can see these stocks had an average of 26.3 hedge funds with bullish positions and the average amount invested in these stocks was $707 million. That figure was $547 million in ROK's case. Otis Worldwide Corporation (NYSE:OTIS) is the most popular stock in this table. On the other hand Telefonica S.A. (NYSE:TEF) is the least popular one with only 6 bullish hedge fund positions. Rockwell Automation Inc. (NYSE:ROK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ROK is 84. 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 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 beat the market by 23.2 percentage points. Unfortunately ROK wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ROK were disappointed as the stock returned 8.7% during the same time period 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 many of these stocks already outperformed the market so far this year.
