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Hedge Funds Have Never Been This Bullish On O’Reilly Automotive Inc (ORLY)

Abigail Fisher

Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

O'Reilly Automotive Inc (NASDAQ:ORLY) investors should be aware of an increase in support from the world's most elite money managers lately. Our calculations also showed that ORLY isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In today’s marketplace there are a lot of formulas stock traders employ to size up publicly traded companies. Two of the most underrated formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the best investment managers can outpace the S&P 500 by a healthy amount (see the details here).

ORLY_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 take a glance at the latest hedge fund action surrounding O'Reilly Automotive Inc (NASDAQ:ORLY).

What does smart money think about O'Reilly Automotive Inc (NASDAQ:ORLY)?

At Q2's end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 16% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in ORLY over the last 16 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

David Abrams

Among these funds, Akre Capital Management held the most valuable stake in O'Reilly Automotive Inc (NASDAQ:ORLY), which was worth $697 million at the end of the second quarter. On the second spot was Abrams Capital Management which amassed $197.2 million worth of shares. Moreover, Diamond Hill Capital, AltaRock Partners, and AQR Capital Management were also bullish on O'Reilly Automotive Inc (NASDAQ:ORLY), allocating a large percentage of their portfolios to this stock.

Now, key money managers have jumped into O'Reilly Automotive Inc (NASDAQ:ORLY) headfirst. Diamond Hill Capital, managed by Ric Dillon, initiated the biggest position in O'Reilly Automotive Inc (NASDAQ:ORLY). Diamond Hill Capital had $140.3 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also made a $23.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Clint Carlson's Carlson Capital, Perella Weinberg Partners, and John Brandmeyer's Cognios Capital.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as O'Reilly Automotive Inc (NASDAQ:ORLY) but similarly valued. These stocks are Public Service Enterprise Group Incorporated (NYSE:PEG), Tyson Foods, Inc. (NYSE:TSN), Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK), and Xilinx, Inc. (NASDAQ:XLNX). All of these stocks' market caps resemble ORLY's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PEG,23,904765,-5 TSN,39,1442476,-4 TLK,7,146356,-2 XLNX,39,1145969,-17 Average,27,909892,-7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $910 million. That figure was $1820 million in ORLY's case. Tyson Foods, Inc. (NYSE:TSN) is the most popular stock in this table. On the other hand Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks O'Reilly Automotive Inc (NASDAQ:ORLY) is more popular among hedge funds. 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. Hedge funds were also right about betting on ORLY as the stock returned 7.9% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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