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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Oracle Corporation (NYSE:ORCL).
Is Oracle (ORCL) stock a buy or sell? Prominent investors were cutting their exposure. The number of bullish hedge fund bets were cut by 4 lately. Oracle Corporation (NYSE:ORCL) was in 52 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 74. Our calculations also showed that ORCL isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Richard S. Pzena of Pzena Investment Management
At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 (or at the end of this article). Now let's review the fresh hedge fund action surrounding Oracle Corporation (NYSE:ORCL).
Do Hedge Funds Think ORCL Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the third quarter of 2020. On the other hand, there were a total of 59 hedge funds with a bullish position in ORCL a year ago. With hedgies' sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Oracle Corporation (NYSE:ORCL), which was worth $901.4 million at the end of the fourth quarter. On the second spot was AQR Capital Management which amassed $245.2 million worth of shares. Pzena Investment Management, D E Shaw, and Adage Capital Management 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 Amitell Capital allocated the biggest weight to Oracle Corporation (NYSE:ORCL), around 2.13% of its 13F portfolio. Wallace R. Weitz & Co. is also relatively very bullish on the stock, designating 2.03 percent of its 13F equity portfolio to ORCL.
Seeing as Oracle Corporation (NYSE:ORCL) has faced a decline in interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of money managers that slashed their entire stakes in the fourth quarter. Intriguingly, Michael Gelband's ExodusPoint Capital cut the largest stake of the 750 funds followed by Insider Monkey, comprising an estimated $20.6 million in stock. Robert Rodriguez and Steven Romick's fund, First Pacific Advisors LLC, also said goodbye to its stock, about $16.2 million worth. These transactions are important to note, as total hedge fund interest dropped by 4 funds in the fourth quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Oracle Corporation (NYSE:ORCL) but similarly valued. We will take a look at AbbVie Inc (NYSE:ABBV), Cisco Systems, Inc. (NASDAQ:CSCO), Thermo Fisher Scientific Inc. (NYSE:TMO), Broadcom Inc (NASDAQ:AVGO), Exxon Mobil Corporation (NYSE:XOM), Accenture Plc (NYSE:ACN), and QUALCOMM, Incorporated (NASDAQ:QCOM). All of these stocks' market caps are closest to ORCL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ABBV,83,6965013,1 CSCO,60,4974309,1 TMO,89,5470797,9 AVGO,59,3342445,0 XOM,63,2208617,11 ACN,50,2133706,4 QCOM,85,2727547,-2 Average,69.9,3974633,3.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 69.9 hedge funds with bullish positions and the average amount invested in these stocks was $3975 million. That figure was $2450 million in ORCL's case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Accenture Plc (NYSE:ACN) is the least popular one with only 50 bullish hedge fund positions. Oracle Corporation (NYSE:ORCL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ORCL is 24.6. 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 negative signal and 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 5.3% in 2021 through March 19th and surpassed the market again by 0.8 percentage points. Unfortunately ORCL wasn't nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); ORCL investors were disappointed as the stock returned 2.8% since the end of December (through 3/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.