Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Oracle Corporation (NYSE:ORCL).
Is Oracle Corporation (NYSE:ORCL) a healthy stock for your portfolio? The smart money is in a bullish mood. The number of bullish hedge fund bets increased by 9 lately. Our calculations also showed that ORCL isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 40 percentage points since May 2014 through May 30, 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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Boykin Curry of Eagle Capital
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the latest hedge fund action encompassing Oracle Corporation (NYSE:ORCL).
How have hedgies been trading Oracle Corporation (NYSE:ORCL)?
At Q2’s end, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ORCL over the last 16 quarters. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
The largest stake in Oracle Corporation (NYSE:ORCL) was held by Eagle Capital Management, which reported holding $1170.7 million worth of stock at the end of March. It was followed by Fisher Asset Management with a $886.9 million position. Other investors bullish on the company included Yacktman Asset Management, AQR Capital Management, and Pzena Investment Management.
Now, some big names have been driving this bullishness. Capital Growth Management, managed by Ken Heebner, established the most valuable position in Oracle Corporation (NYSE:ORCL). Capital Growth Management had $42.7 million invested in the company at the end of the quarter. Michael Kharitonov and Jon David McAuliffe’s Voleon Capital also initiated a $41.7 million position during the quarter. The other funds with brand new ORCL positions are Matthew Tewksbury’s Stevens Capital Management, Frank Slattery’s Symmetry Peak Management, and Paul Hondros’s AlphaOne Capital Partners.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Oracle Corporation (NYSE:ORCL) but similarly valued. We will take a look at Comcast Corporation (NASDAQ:CMCSA), China Mobile Limited (NYSE:CHL), PepsiCo, Inc. (NASDAQ:PEP), and Toyota Motor Corporation (NYSE:TM). All of these stocks’ market caps resemble ORCL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CMCSA | 86 | 6540090 | -1 |
| CHL | 13 | 443557 | -6 |
| PEP | 55 | 3618380 | 4 |
| TM | 8 | 193342 | -2 |
| Average | 40.5 | 2698842 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.5 hedge funds with bullish positions and the average amount invested in these stocks was $2699 million. That figure was $5536 million in ORCL’s case. Comcast Corporation (NASDAQ:CMCSA) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 8 bullish hedge fund positions. Oracle Corporation (NYSE:ORCL) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ORCL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ORCL were disappointed as the stock returned -3% during the third quarter 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
