In this article we will take a look at whether hedge funds think Owl Rock Capital Corporation (NYSE:ORCC) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Hedge fund interest in Owl Rock Capital Corporation (NYSE:ORCC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ORCC isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare ORCC to other stocks including Janus Henderson Group plc (NYSE:JHG), Essent Group Ltd (NYSE:ESNT), and 1Life Healthcare, Inc. (NASDAQ:ONEM) to get a better sense of its popularity.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Keeping this in mind we're going to take a gander at the fresh hedge fund action surrounding Owl Rock Capital Corporation (NYSE:ORCC).
Do Hedge Funds Think ORCC Is A Good Stock To Buy Now?
At Q1's end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ORCC over the last 23 quarters. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Blue Pool Capital, managed by Alexander West, holds the most valuable position in Owl Rock Capital Corporation (NYSE:ORCC). Blue Pool Capital has a $93.8 million position in the stock, comprising 21% of its 13F portfolio. The second most bullish fund manager is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $73.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish include Derek C. Schrier's Indaba Capital Management, Renaissance Technologies and D. E. Shaw's D E Shaw. In terms of the portfolio weights assigned to each position Blue Pool Capital allocated the biggest weight to Owl Rock Capital Corporation (NYSE:ORCC), around 21.05% of its 13F portfolio. Indaba Capital Management is also relatively very bullish on the stock, designating 5.33 percent of its 13F equity portfolio to ORCC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Tudor Investment Corp. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was PEAK6 Capital Management).
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Owl Rock Capital Corporation (NYSE:ORCC) but similarly valued. These stocks are Janus Henderson Group plc (NYSE:JHG), Essent Group Ltd (NYSE:ESNT), 1Life Healthcare, Inc. (NASDAQ:ONEM), Stag Industrial Inc (NYSE:STAG), Cousins Properties Incorporated (NYSE:CUZ), Schrodinger, Inc. (NASDAQ:SDGR), and ACV Auctions Inc. (NASDAQ:ACVA). This group of stocks' market values resemble ORCC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JHG,28,917244,6 ESNT,24,332686,-8 ONEM,30,750776,0 STAG,17,173064,-8 CUZ,16,73697,0 SDGR,17,930544,-7 ACVA,25,156405,25 Average,22.4,476345,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $476 million. That figure was $309 million in ORCC's case. 1Life Healthcare, Inc. (NASDAQ:ONEM) is the most popular stock in this table. On the other hand Cousins Properties Incorporated (NYSE:CUZ) is the least popular one with only 16 bullish hedge fund positions. Owl Rock Capital Corporation (NYSE:ORCC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ORCC is 49.3. 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 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately ORCC wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ORCC investors were disappointed as the stock returned 6.1% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.