Is Rollins, Inc. (ROL) A Good Stock To Buy?

·6 min read

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Rollins, Inc. (NYSE:ROL).

Rollins, Inc. (NYSE:ROL) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 30 hedge funds' portfolios at the end of the second quarter of 2021. Our calculations also showed that ROL isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as Zai Lab Limited (NASDAQ:ZLAB), Nuance Communications Inc. (NASDAQ:NUAN), and IDEX Corporation (NYSE:IEX) to gather more data points.

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 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (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

Tom Gayner of Markel Gayner Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 fresh hedge fund action surrounding Rollins, Inc. (NYSE:ROL).

Do Hedge Funds Think ROL Is A Good Stock To Buy Now?

At Q2's end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 29 hedge funds held shares or bullish call options in ROL a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Select Equity Group, managed by Robert Joseph Caruso, holds the biggest position in Rollins, Inc. (NYSE:ROL). Select Equity Group has a $139.9 million position in the stock, comprising 0.5% of its 13F portfolio. The second most bullish fund manager is GAMCO Investors, led by Mario Gabelli, holding a $95.6 million position; 0.8% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish consist of Terry Smith's Fundsmith LLP, Cliff Asness's AQR Capital Management and Tom Gayner's Markel Gayner Asset Management. In terms of the portfolio weights assigned to each position Value Holdings LP allocated the biggest weight to Rollins, Inc. (NYSE:ROL), around 7.41% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, dishing out 0.98 percent of its 13F equity portfolio to ROL.

Since Rollins, Inc. (NYSE:ROL) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few hedge funds that elected to cut their full holdings in the second quarter. Intriguingly, Greg Poole's Echo Street Capital Management said goodbye to the biggest investment of the 750 funds monitored by Insider Monkey, worth about $24.5 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund sold off about $8.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now take a look at hedge fund activity in other stocks similar to Rollins, Inc. (NYSE:ROL). We will take a look at Zai Lab Limited (NASDAQ:ZLAB), Nuance Communications Inc. (NASDAQ:NUAN), IDEX Corporation (NYSE:IEX), Entegris Inc (NASDAQ:ENTG), VICI Properties Inc. (NYSE:VICI), Dynatrace, Inc. (NYSE:DT), and Cardinal Health, Inc. (NYSE:CAH). This group of stocks' market caps are closest to ROL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ZLAB,36,1029464,4 NUAN,72,5576065,15 IEX,22,945302,3 ENTG,25,1389606,2 VICI,37,664684,-4 DT,50,1949953,-2 CAH,40,897223,1 Average,40.3,1778900,2.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.3 hedge funds with bullish positions and the average amount invested in these stocks was $1779 million. That figure was $611 million in ROL's case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand IDEX Corporation (NYSE:IEX) is the least popular one with only 22 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. Our overall hedge fund sentiment score for ROL is 39.5. 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 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. A small number of hedge funds were also right about betting on ROL as the stock returned 9.3% since the end of the second quarter (through 10/15) and outperformed the market by an even larger margin.

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

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