Is Adobe Systems Incorporated (ADBE) A Good Stock To Buy?

The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on Adobe Systems Incorporated (NASDAQ:ADBE) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Adobe Systems Incorporated (NASDAQ:ADBE) worth your attention right now? Prominent investors are becoming hopeful. The number of long hedge fund bets moved up by three in recent months. ADBE was in 42 hedge funds’ portfolios at the end of the third quarter of 2015. There were 39 hedge funds in our database with ADBE positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as FedEx Corporation (NYSE:FDX), The Southern Company (NYSE:SO), and Carnival Corporation (NYSE:CCL) to gather more data points.

In the eyes of most investors, hedge funds are perceived as unimportant, old investment tools of yesteryear. While there are more than 8000 funds with their doors open at present, We look at the aristocrats of this group, approximately 700 funds. These hedge fund managers control the lion’s share of all hedge funds’ total asset base, and by shadowing their top stock picks, Insider Monkey has revealed a number of investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, let’s take a look at the fresh action regarding Adobe Systems Incorporated (NASDAQ:ADBE).

How are hedge funds trading Adobe Systems Incorporated (NASDAQ:ADBE)?

At the Q3’s end, a total of 42 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from the previous quarter. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jeffrey Ubben’s ValueAct Capital has the number one position in Adobe Systems Incorporated (NASDAQ:ADBE), worth close to $1.15 billion, accounting for 6.7% of its total 13F portfolio. The second largest stake is held by Lone Pine Capital, led by Stephen Mandel, holding a $510.5 million position; 2.1% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism comprise Philippe Laffont’s Coatue Management and Ken Griffin’s Citadel Investment Group.

Consequently, key hedge funds were leading the bulls’ herd. Eton Park Capital, managed by Eric Mindich, assembled the largest call position in Adobe Systems Incorporated (NASDAQ:ADBE). Eton Park Capital had $300.1 million invested in the company at the end of the quarter. Gabriel Plotkin’s Melvin Capital Management also made a $26.7 million investment in the stock during the quarter. The other funds with brand new ADBE positions are Benjamin A. Smith’s Laurion Capital Management and Alex Sacerdote’s Whale Rock Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Adobe Systems Incorporated (NASDAQ:ADBE) but similarly valued. These stocks are FedEx Corporation (NYSE:FDX), The Southern Company (NYSE:SO), Carnival Corporation (NYSE:CCL), and Itau Unibanco Holding SA (ADR) (NYSE:ITUB). All of these stocks’ market caps resemble ADBE’s market cap.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1.72 billion. That figure was $4.07 billion in ADBE’s case. FedEx Corporation (NYSE:FDX) is the most popular stock in this table. On the other hand The Southern Company (NYSE:SO) is the least popular one with only 17 bullish hedge fund positions. Adobe Systems Incorporated (NASDAQ:ADBE) is not the most popular stock in this group, but hedge fund interest is still above average, which might suggest that the stock may be an interesting investment. However, more research is required in order to get a clearer picture of the company’s performance.