We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional 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. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Okta, Inc. (NASDAQ:OKTA) and determine whether hedge funds skillfully traded this stock.
Okta, Inc. (NASDAQ:OKTA) shareholders have witnessed an increase in hedge fund interest in recent months. Okta, Inc. (NASDAQ:OKTA) was in 62 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 61. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OKTA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Ken Griffin of Citadel Investment Group
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to take a glance at the new hedge fund action regarding Okta, Inc. (NASDAQ:OKTA).
Do Hedge Funds Think OKTA Is A Good Stock To Buy Now?
At Q3’s end, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the second quarter of 2021. By comparison, 51 hedge funds held shares or bullish call options in OKTA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, SCGE Management, managed by Christopher Lyle, holds the most valuable position in Okta, Inc. (NASDAQ:OKTA). SCGE Management has a $424.1 million position in the stock, comprising 3.9% of its 13F portfolio. On SCGE Management’s heels is Whale Rock Capital Management, led by Alex Sacerdote, holding a $221.2 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism consist of Robert Pitts’s Steadfast Capital Management, Nancy Zevenbergen’s Zevenbergen Capital Investments and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position SQN Investors allocated the biggest weight to Okta, Inc. (NASDAQ:OKTA), around 5.78% of its 13F portfolio. Jeneq Management is also relatively very bullish on the stock, setting aside 5.09 percent of its 13F equity portfolio to OKTA.
Consequently, some big names were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the biggest position in Okta, Inc. (NASDAQ:OKTA). Point72 Asset Management had $52.3 million invested in the company at the end of the quarter. Sanjay Venkat’s Jeneq Management also initiated a $33.4 million position during the quarter. The other funds with new positions in the stock are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Renaissance Technologies, and David Atterbury’s Whetstone Capital Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Okta, Inc. (NASDAQ:OKTA) but similarly valued. We will take a look at Zscaler, Inc. (NASDAQ:ZS), Centene Corporation (NYSE:CNC), CRH PLC (NYSE:CRH), General Mills, Inc. (NYSE:GIS), SBA Communications Corporation (NASDAQ:SBAC), Yum! Brands, Inc. (NYSE:YUM), and Cloudflare, Inc. (NYSE:NET). This group of stocks’ market valuations match OKTA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ZS | 38 | 1624343 | 0 |
| CNC | 50 | 2431144 | 1 |
| CRH | 7 | 83127 | -2 |
| GIS | 32 | 731647 | -5 |
| SBAC | 36 | 1893871 | -7 |
| YUM | 38 | 757636 | 3 |
| NET | 50 | 958432 | 7 |
| Average | 35.9 | 1211457 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.9 hedge funds with bullish positions and the average amount invested in these stocks was $1211 million. That figure was $2262 million in OKTA’s case. Centene Corporation (NYSE:CNC) is the most popular stock in this table. On the other hand CRH PLC (NYSE:CRH) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Okta, Inc. (NASDAQ:OKTA) is more popular among hedge funds. Our overall hedge fund sentiment score for OKTA is 90. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, OKTA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on OKTA were disappointed as the stock returned -16.6% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Okta Inc. (NASDAQ:OKTA)
Follow Okta Inc. (NASDAQ:OKTA)
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Disclosure: None. This article was originally published at Insider Monkey.
