Was The Smart Money Right About Oracle Corporation (ORCL)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Oracle Corporation (NYSE:ORCL)? The smart money sentiment can provide an answer to this question.

Is Oracle Corporation (NYSE:ORCL) a good investment today? The best stock pickers were in a bullish mood. The number of bullish hedge fund bets moved up by 3 recently. Oracle Corporation (NYSE:ORCL) was in 55 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 74. Our calculations also showed that ORCL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 52 hedge funds in our database with ORCL positions at the end of the first quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Richard S. Pzena of Pzena Investment Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. 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. 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 homepage. With all of this in mind let’s take a gander at the recent hedge fund action encompassing Oracle Corporation (NYSE:ORCL).

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

Heading into the third quarter of 2021, a total of 55 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ORCL over the last 24 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

The largest stake in Oracle Corporation (NYSE:ORCL) was held by Fisher Asset Management, which reported holding $1158.4 million worth of stock at the end of June. It was followed by Arrowstreet Capital with a $397 million position. Other investors bullish on the company included AQR Capital Management, Citadel Investment Group, and Pzena Investment Management. In terms of the portfolio weights assigned to each position Key Square Capital Management allocated the biggest weight to Oracle Corporation (NYSE:ORCL), around 4.4% of its 13F portfolio. Antipodes Partners is also relatively very bullish on the stock, dishing out 2.64 percent of its 13F equity portfolio to ORCL.

As industrywide interest jumped, some big names have been driving this bullishness. Antipodes Partners, managed by Jacob Mitchell, established the biggest position in Oracle Corporation (NYSE:ORCL). Antipodes Partners had $73.2 million invested in the company at the end of the quarter. Scott Bessent’s Key Square Capital Management also initiated a $23.3 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Michael Gelband’s ExodusPoint Capital.

Let’s check out hedge fund activity in other stocks similar to Oracle Corporation (NYSE:ORCL). We will take a look at Abbott Laboratories (NYSE:ABT), AT&T Inc. (NYSE:T), Novartis AG (NYSE:NVS), PepsiCo, Inc. (NASDAQ:PEP), Chevron Corporation (NYSE:CVX), AbbVie Inc (NYSE:ABBV), and Thermo Fisher Scientific Inc. (NYSE:TMO). This group of stocks’ market values resemble ORCL’s market value.

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As you can see these stocks had an average of 62.3 hedge funds with bullish positions and the average amount invested in these stocks was $4467 million. That figure was $2890 million in ORCL’s case. Thermo Fisher Scientific Inc. (NYSE:TMO) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 22 bullish hedge fund positions. Oracle Corporation (NYSE:ORCL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ORCL is 55.7. 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. 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 26.3% in 2021 through October 29th and still beat the market by 2.3 percentage points. A small number of hedge funds were also right about betting on ORCL as the stock returned 24.1% since the end of the second quarter (through 10/29) and outperformed the market by an even larger margin.

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