Is Adobe Inc. (NASDAQ:ADBE) a healthy stock for your portfolio? Money managers are becoming more confident. The number of long hedge fund bets moved up by 5 recently. Our calculations also showed that ADBE is among the 30 most popular stocks among hedge funds, ranking 16th. Hedge fund sentiment towards Adobe is currently at an all time high.
This is usually a very bullish signal. For example hedge fund sentiment in Xilinx Inc. (XLNX) was also at its all time high at the beginning of this year and the stock returned more than 46% in 2.5 months. We observed a similar performance from Progressive Corporation (PGR) which returned 27% and outperformed the SPY by nearly 14 percentage points in 2.5 months. Hedge fund sentiment towards IQVIA Holdings Inc. (IQV), Brookfield Asset Management Inc. (BAM), Atlassian Corporation Plc (TEAM), RCL, and CRH hit all time highs at the end of December, and all of these stocks returned more than 20% in the first 2.5 months of this year.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a gander at the fresh hedge fund action regarding Adobe Inc. (NASDAQ:ADBE).
What have hedge funds been doing with Adobe Inc. (NASDAQ:ADBE)?
At the end of the fourth quarter, a total of 84 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. By comparison, 67 hedge funds held shares or bullish call options in ADBE a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Adobe Inc. (NASDAQ:ADBE) was held by Lone Pine Capital, which reported holding $1160.1 million worth of stock at the end of September. It was followed by AQR Capital Management with a $840.6 million position. Other investors bullish on the company included Viking Global, Arrowstreet Capital, and Egerton Capital Limited.
Now, some big names were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, initiated the biggest position in Adobe Inc. (NASDAQ:ADBE). Viking Global had $629.3 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also initiated a $352.9 million position during the quarter. The other funds with brand new ADBE positions are Daniel Sundheim’s D1 Capital Partners, and Steve Cohen’s Point72 Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Adobe Inc. (NASDAQ:ADBE) but similarly valued. These stocks are Novo Nordisk A/S (NYSE:NVO), Sanofi (NASDAQ:SNY), BHP Group (NYSE:BBL), and salesforce.com, inc. (NYSE:CRM). This group of stocks’ market values match ADBE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVO | 18 | 2150293 | 1 |
| SNY | 23 | 847479 | -1 |
| BBL | 15 | 713874 | -1 |
| CRM | 99 | 5077847 | 13 |
| Average | 38.75 | 2197373 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.75 hedge funds with bullish positions and the average amount invested in these stocks was $2197 million. That figure was $7816 million in ADBE’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand BHP Group (NYSE:BBL) is the least popular one with only 15 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 calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately ADBE wasn’t in this group. Hedge funds that bet on ADBE were able to outperform the market by 0.5 percentage points. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
