Rollins, Inc. (ROL): Are Hedge Funds Right About This Stock?

Nina Todic

Does Rollins, Inc. (NYSE:ROL) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Is Rollins, Inc. (NYSE:ROL) a buy, sell, or hold? Money managers are in a bullish mood. The number of bullish hedge fund positions moved up by 3 recently. Our calculations also showed that ROL isn't among the 30 most popular stocks among hedge funds. ROL was in 23 hedge funds' portfolios at the end of the second quarter of 2019. There were 20 hedge funds in our database with ROL holdings at the end of the previous quarter.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (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

Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the fresh hedge fund action regarding Rollins, Inc. (NYSE:ROL).

How have hedgies been trading Rollins, Inc. (NYSE:ROL)?

At Q2's end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ROL over the last 16 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ROL Positions
No of Hedge Funds with ROL Positions

Of the funds tracked by Insider Monkey, Mario Gabelli's GAMCO Investors has the largest position in Rollins, Inc. (NYSE:ROL), worth close to $93.6 million, corresponding to 0.7% of its total 13F portfolio. On GAMCO Investors's heels is AQR Capital Management, led by Cliff Asness, holding a $47.2 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish consist of Steve Cohen's Point72 Asset Management, Tom Gayner's Markel Gayner Asset Management and Thomas Rigo's Bishop Rock Capital.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the most outsized position in Rollins, Inc. (NYSE:ROL). Point72 Asset Management had $40.5 million invested in the company at the end of the quarter. Michael Hintze's CQS Cayman LP also initiated a $6.5 million position during the quarter. The other funds with brand new ROL positions are Steve Cohen's Point72 Asset Management, Michael Gelband's ExodusPoint Capital, and Bruce Kovner's Caxton Associates LP.

Let's also examine hedge fund activity in other stocks similar to Rollins, Inc. (NYSE:ROL). We will take a look at Wabtec Corporation (NYSE:WAB), Sun Communities Inc (NYSE:SUI), Raymond James Financial, Inc. (NYSE:RJF), and PG&E Corporation (NYSE:PCG). This group of stocks' market values match ROL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WAB,27,1363344,-9 SUI,20,429029,2 RJF,35,764230,0 PCG,67,6316603,-5 Average,37.25,2218302,-3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.25 hedge funds with bullish positions and the average amount invested in these stocks was $2218 million. That figure was $254 million in ROL's case. PG&E Corporation (NYSE:PCG) is the most popular stock in this table. On the other hand Sun Communities Inc (NYSE:SUI) is the least popular one with only 20 bullish hedge fund positions. Rollins, Inc. (NYSE:ROL) 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ROL wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ROL investors were disappointed as the stock returned -4.7% during the third 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 20 most popular stocks (see the video below) among hedge funds as many of these stocks already outperformed the market so far in 2019.

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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