Okta, Inc. (OKTA): Are Hedge Funds Right About This Stock?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtOkta, Inc. (NASDAQ:OKTA) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Okta, Inc. (NASDAQ:OKTA) a worthy investment now? Prominent investors were getting more optimistic. The number of long hedge fund positions went up by 9 recently. Our calculations also showed that OKTA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are assumed to be unimportant, outdated financial tools of the past. While there are greater than 8000 funds trading at the moment, We look at the upper echelon of this club, around 850 funds. Most estimates calculate that this group of people watch over most of all hedge funds’ total capital, and by shadowing their first-class equity investments, Insider Monkey has determined a number of investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. 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 gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to review the new hedge fund action surrounding Okta, Inc. (NASDAQ:OKTA).

How are hedge funds trading Okta, Inc. (NASDAQ:OKTA)?

At Q1’s end, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OKTA over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Whale Rock Capital Management, managed by Alex Sacerdote, holds the most valuable position in Okta, Inc. (NASDAQ:OKTA). Whale Rock Capital Management has a $228.3 million position in the stock, comprising 3.1% of its 13F portfolio. The second most bullish fund manager is Alkeon Capital Management, managed by Panayotis Takis Sparaggis, which holds a $195.2 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish contain Christopher Lyle’s SCGE Management, Nancy Zevenbergen’s Zevenbergen Capital Investments and Amish Mehta’s SQN Investors. In terms of the portfolio weights assigned to each position SQN Investors allocated the biggest weight to Okta, Inc. (NASDAQ:OKTA), around 8.5% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, setting aside 5.73 percent of its 13F equity portfolio to OKTA.

Now, key hedge funds have been driving this bullishness. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the biggest position in Okta, Inc. (NASDAQ:OKTA). Polar Capital had $39.6 million invested in the company at the end of the quarter.  Renaissance Technologies also made a $25.6 million investment in the stock during the quarter. The following funds were also among the new OKTA investors: Sander Gerber’s Hudson Bay Capital Management, Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital, and Daryl Smith’s Kayak Investment Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Okta, Inc. (NASDAQ:OKTA) but similarly valued. These stocks are Carrier Global Corporation (NYSE:CARR), Slack Technologies Inc (NYSE:WORK), Chewy, Inc. (NYSE:CHWY), and ORIX Corporation (NYSE:IX). This group of stocks’ market values match OKTA’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $1087 million in OKTA’s case. Chewy, Inc. (NYSE:CHWY) is the most popular stock in this table. On the other hand Carrier Global Corporation (NYSE:CARR) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Okta, Inc. (NASDAQ:OKTA) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on OKTA as the stock returned 63.8% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.