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Adobe Inc. (ADBE): Are Hedge Funds Right About This Stock?

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·5 min read
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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Adobe Inc. (NASDAQ:ADBE).

Adobe Inc. (NASDAQ:ADBE) has seen an increase in activity from the world's largest hedge funds recently. Adobe Inc. (NASDAQ:ADBE) was in 114 hedge funds' portfolios at the end of December. The all time high for this statistic is 115. Our calculations also showed that ADBE ranked #16 among the 30 most popular stocks among hedge funds (click for Q4 rankings).

Today there are dozens of metrics shareholders use to analyze publicly traded companies. A couple of the most underrated metrics are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can trounce the broader indices by a significant amount (see the details here).

Charles Akre Akre Capital Management
Charles Akre Akre Capital Management

Charles Akre of Akre Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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 website. Now we're going to take a look at the fresh hedge fund action surrounding Adobe Inc. (NASDAQ:ADBE).

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

At the end of December, a total of 114 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in ADBE over the last 22 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ADBE A Good Stock To Buy?
Is ADBE A Good Stock To Buy?

The largest stake in Adobe Inc. (NASDAQ:ADBE) was held by Fisher Asset Management, which reported holding $2909.8 million worth of stock at the end of December. It was followed by Lone Pine Capital with a $1010.6 million position. Other investors bullish on the company included GQG Partners, Arrowstreet Capital, and Akre Capital Management. In terms of the portfolio weights assigned to each position Keywise Capital Management allocated the biggest weight to Adobe Inc. (NASDAQ:ADBE), around 13.72% of its 13F portfolio. Center Lake Capital is also relatively very bullish on the stock, setting aside 9.5 percent of its 13F equity portfolio to ADBE.

As industrywide interest jumped, specific money managers were breaking ground themselves. Point State Capital, managed by Zach Schreiber, established the largest position in Adobe Inc. (NASDAQ:ADBE). Point State Capital had $77.6 million invested in the company at the end of the quarter. Michael Sidhom's Immersion Capital also made a $37 million investment in the stock during the quarter. The other funds with brand new ADBE positions are Brennan Diaz's Fernbridge Capital Management, Steve Cohen's Point72 Asset Management, and Tor Minesuk's Mondrian Capital.

Let's also examine hedge fund activity in other stocks similar to Adobe Inc. (NASDAQ:ADBE). We will take a look at Comcast Corporation (NASDAQ:CMCSA), Netflix, Inc. (NASDAQ:NFLX), The Coca-Cola Company (NYSE:KO), NIKE, Inc. (NYSE:NKE), Pinduoduo Inc. (NASDAQ:PDD), Toyota Motor Corporation (NYSE:TM), and Novartis AG (NYSE:NVS). This group of stocks' market values are similar to ADBE's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CMCSA,84,8831767,2 NFLX,116,15633343,12 KO,62,24683372,2 NKE,82,6285513,7 PDD,54,10528058,20 TM,11,797163,-1 NVS,23,1680463,-2 Average,61.7,9777097,5.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 61.7 hedge funds with bullish positions and the average amount invested in these stocks was $9777 million. That figure was $11928 million in ADBE's case. Netflix, Inc. (NASDAQ:NFLX) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 11 bullish hedge fund positions. Adobe Inc. (NASDAQ:ADBE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADBE is 92.2. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately ADBE wasn't nearly as successful as these 30 stocks and hedge funds that were betting on ADBE were disappointed as the stock returned 3.2% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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