The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded T. Rowe Price Group, Inc. (NASDAQ:TROW) based on those filings.
Is T. Rowe Price Group, Inc. (NASDAQ:TROW) a buy here? Investors who are in the know were taking a pessimistic view. The number of long hedge fund positions went down by 9 in recent months. T. Rowe Price Group, Inc. (NASDAQ:TROW) was in 26 hedge funds' portfolios at the end of March. The all time high for this statistic is 35. Our calculations also showed that TROW isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 35 hedge funds in our database with TROW holdings at the end of December.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Paul Marshall of Marshall Wace
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a look at the recent hedge fund action encompassing T. Rowe Price Group, Inc. (NASDAQ:TROW).
Do Hedge Funds Think TROW Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey were long this stock, a change of -26% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards TROW over the last 23 quarters. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of T. Rowe Price Group, Inc. (NASDAQ:TROW), with a stake worth $147.4 million reported as of the end of March. Trailing AQR Capital Management was Markel Gayner Asset Management, which amassed a stake valued at $53.9 million. Marshall Wace LLP, D E Shaw, and Bridgewater Associates 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 Markel Gayner Asset Management allocated the biggest weight to T. Rowe Price Group, Inc. (NASDAQ:TROW), around 0.75% of its 13F portfolio. Qtron Investments is also relatively very bullish on the stock, setting aside 0.35 percent of its 13F equity portfolio to TROW.
Judging by the fact that T. Rowe Price Group, Inc. (NASDAQ:TROW) has faced bearish sentiment from the smart money, it's safe to say that there lies a certain "tier" of fund managers that elected to cut their entire stakes in the first quarter. At the top of the heap, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors dumped the largest stake of all the hedgies monitored by Insider Monkey, totaling close to $36.1 million in stock. Renaissance Technologies, also said goodbye to its stock, about $29.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 9 funds in the first quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as T. Rowe Price Group, Inc. (NASDAQ:TROW) but similarly valued. These stocks are Electronic Arts Inc. (NASDAQ:EA), Constellation Brands, Inc. (NYSE:STZ), Agilent Technologies Inc. (NYSE:A), Ferrari N.V. (NYSE:RACE), Cadence Design Systems Inc (NASDAQ:CDNS), Schlumberger Limited. (NYSE:SLB), and Cummins Inc. (NYSE:CMI). This group of stocks' market caps match TROW's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EA,44,1430436,-6 STZ,58,1231651,0 A,42,3464139,-3 RACE,26,1257227,-3 CDNS,30,1490527,-2 SLB,50,1141533,0 CMI,37,817545,-8 Average,41,1547580,-3.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 41 hedge funds with bullish positions and the average amount invested in these stocks was $1548 million. That figure was $304 million in TROW's case. Constellation Brands, Inc. (NYSE:STZ) is the most popular stock in this table. On the other hand Ferrari N.V. (NYSE:RACE) is the least popular one with only 26 bullish hedge fund positions. Compared to these stocks T. Rowe Price Group, Inc. (NASDAQ:TROW) is even less popular than RACE. Our overall hedge fund sentiment score for TROW is 18.3. 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. Hedge funds clearly dropped the ball on TROW as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and still beat the market by 6.7 percentage points. A small number of hedge funds were also right about betting on TROW as the stock returned 22.1% since Q1 (through July 9th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
