In this article we are going to use hedge fund sentiment as a tool and determine whether Owl Rock Capital Corporation (NYSE:ORCC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is ORCC a good stock to buy now? Owl Rock Capital Corporation (NYSE:ORCC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of September. Our calculations also showed that ORCC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). At the end of this article we will also compare ORCC to other stocks including East West Bancorp, Inc. (NASDAQ:EWBC), BRP Inc. (NASDAQ:DOOO), and AutoNation, Inc. (NYSE:AN) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Today there are tons of signals stock market investors use to analyze publicly traded companies. Some of the most useful signals are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can outclass the broader indices by a superb amount (see the details here).
Ryan Tolkin, CIO of Schonfeld Strategic Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to analyze the new hedge fund action encompassing Owl Rock Capital Corporation (NYSE:ORCC).
Do Hedge Funds Think ORCC Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 6 hedge funds held shares or bullish call options in ORCC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Alexander West’s Blue Pool Capital has the largest position in Owl Rock Capital Corporation (NYSE:ORCC), worth close to $82.2 million, corresponding to 27.6% of its total 13F portfolio. On Blue Pool Capital’s heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $31.1 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers that hold long positions encompass Derek C. Schrier’s Indaba Capital Management, Israel Englander’s Millennium Management and Renaissance Technologies. 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 27.65% of its 13F portfolio. Indaba Capital Management is also relatively very bullish on the stock, designating 5.96 percent of its 13F equity portfolio to ORCC.
Due to the fact that Owl Rock Capital Corporation (NYSE:ORCC) has faced falling interest from hedge fund managers, it’s safe to say that there was a specific group of money managers that elected to cut their entire stakes heading into Q4. Intriguingly, George Soros’s Soros Fund Management dumped the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth close to $4.9 million in stock, and Jonathan Soros’s JS Capital was right behind this move, as the fund sold off about $0.5 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over 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 East West Bancorp, Inc. (NASDAQ:EWBC), BRP Inc. (NASDAQ:DOOO), AutoNation, Inc. (NYSE:AN), Tempur Sealy International Inc. (NYSE:TPX), Performance Food Group Company (NYSE:PFGC), BridgeBio Pharma, Inc. (NASDAQ:BBIO), and Zai Lab Limited (NASDAQ:ZLAB). This group of stocks’ market valuations resemble ORCC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EWBC | 20 | 195786 | -3 |
| DOOO | 12 | 119883 | -2 |
| AN | 33 | 414421 | 4 |
| TPX | 46 | 1130388 | 0 |
| PFGC | 29 | 276923 | 9 |
| BBIO | 13 | 1527978 | -1 |
| ZLAB | 28 | 356502 | 1 |
| Average | 25.9 | 574554 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.9 hedge funds with bullish positions and the average amount invested in these stocks was $575 million. That figure was $181 million in ORCC’s case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand BRP Inc. (NASDAQ:DOOO) is the least popular one with only 12 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 39.4. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately ORCC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ORCC investors were disappointed as the stock returned 6.2% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Follow Blue Owl Capital Corp (NYSE:OBDC)
Follow Blue Owl Capital Corp (NYSE:OBDC)
Disclosure: None. This article was originally published at Insider Monkey.
