O’Reilly Automotive Inc (ORLY) Fell Out Of Favor With Hedge Funds?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of O’Reilly Automotive Inc (NASDAQ:ORLY).

O’Reilly Automotive Inc (NASDAQ:ORLY) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 44 hedge funds’ portfolios at the end of September. Our calculations also showed that ORLY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare ORLY to other stocks including Cadence Design Systems Inc (NASDAQ:CDNS), Roku, Inc. (NASDAQ:ROKU), and Schlumberger Limited. (NYSE:SLB) to get a better sense of its popularity.

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 let’s take a peek at the latest hedge fund action regarding O’Reilly Automotive Inc (NASDAQ:ORLY).

Do Hedge Funds Think ORLY Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ORLY over the last 25 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Charles Akre’s Akre Capital Management has the number one position in O’Reilly Automotive Inc (NASDAQ:ORLY), worth close to $964.7 million, accounting for 5.9% of its total 13F portfolio. The second most bullish fund manager is Renaissance Technologies, holding a $162 million position; 0.2% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish comprise Cliff Asness’s AQR Capital Management, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Akre Capital Management allocated the biggest weight to O’Reilly Automotive Inc (NASDAQ:ORLY), around 5.94% of its 13F portfolio. Masterton Capital Management is also relatively very bullish on the stock, designating 3.81 percent of its 13F equity portfolio to ORLY.

Since O’Reilly Automotive Inc (NASDAQ:ORLY) has experienced bearish sentiment from the smart money, we can see that there lies a certain “tier” of funds that slashed their positions entirely by the end of the third quarter. Intriguingly, Brian Scudieri’s Kehrs Ridge Capital cut the largest investment of the “upper crust” of funds watched by Insider Monkey, valued at close to $8.5 million in call options. D. E. Shaw’s fund, D E Shaw, also sold off its call options, about $5.7 million worth. These bearish behaviors are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as O’Reilly Automotive Inc (NASDAQ:ORLY) but similarly valued. These stocks are Cadence Design Systems Inc (NASDAQ:CDNS), Roku, Inc. (NASDAQ:ROKU), Schlumberger Limited. (NYSE:SLB), Lucid Group Inc. (NASDAQ:LCID), Trane Technologies plc (NYSE:TT), Digital Realty Trust, Inc. (NYSE:DLR), and Walgreens Boots Alliance Inc (NASDAQ:WBA). This group of stocks’ market valuations are similar to ORLY’s market valuation.

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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 $1214 million. That figure was $2294 million in ORLY’s case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand Lucid Group Inc. (NASDAQ:LCID) is the least popular one with only 18 bullish hedge fund positions. O’Reilly Automotive Inc (NASDAQ:ORLY) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ORLY is 59. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately ORLY wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ORLY were disappointed as the stock returned 4.4% since the end of September (through 11/30) 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 many of these stocks already outperformed the market since 2019.

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

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