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

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Oracle Corporation (NASDAQ:ORCL).

Is Oracle Corporation (NASDAQ:ORCL) an outstanding investment now? The best stock pickers were in a bullish mood. The number of long hedge fund positions improved by 1 recently. Oracle Corporation (NASDAQ:ORCL) was in 49 hedge funds’ portfolios at the end of June. The all time high for this statistics is 74. Our calculations also showed that ORCL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 48 hedge funds in our database with ORCL positions at the end of the first quarter.

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

To the average investor there are tons of metrics market participants employ to value stocks. A couple of the most useful metrics are hedge fund and insider trading moves. Our researchers have shown that, historically, those who follow the best picks of the best money managers can outperform their index-focused peers by a healthy margin (see the details here).

Bruce Kovner of Caxton Associates LP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. Keeping this in mind let’s view the recent hedge fund action surrounding Oracle Corporation (NASDAQ:ORCL).

What does smart money think about Oracle Corporation (NASDAQ:ORCL)?

At Q2’s end, a total of 49 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from one quarter earlier. By comparison, 61 hedge funds held shares or bullish call options in ORCL a year ago. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

More specifically, Fisher Asset Management was the largest shareholder of Oracle Corporation (NASDAQ:ORCL), with a stake worth $721.9 million reported as of the end of September. Trailing Fisher Asset Management was AQR Capital Management, which amassed a stake valued at $310.9 million. Pzena Investment Management, D E Shaw, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Mondrian Capital allocated the biggest weight to Oracle Corporation (NASDAQ:ORCL), around 5.7% of its 13F portfolio. International Value Advisers is also relatively very bullish on the stock, earmarking 4.18 percent of its 13F equity portfolio to ORCL.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, established the most outsized position in Oracle Corporation (NASDAQ:ORCL). Point72 Asset Management had $128.1 million invested in the company at the end of the quarter. Renaissance Technologies also made a $52.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Tor Minesuk’s Mondrian Capital, Matthew Hulsizer’s PEAK6 Capital Management, and Bruce Kovner’s Caxton Associates LP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Oracle Corporation (NASDAQ:ORCL) but similarly valued. These stocks are salesforce.com, inc. (NYSE:CRM), SAP SE (NYSE:SAP), Chevron Corporation (NYSE:CVX), Abbott Laboratories (NYSE:ABT), Eli Lilly and Company (NYSE:LLY), ASML Holding N.V. (NASDAQ:ASML), and Novo Nordisk A/S (NYSE:NVO). This group of stocks’ market valuations are similar to ORCL’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 48.6 hedge funds with bullish positions and the average amount invested in these stocks was $3361 million. That figure was $2312 million in ORCL’s case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 16 bullish hedge fund positions. Oracle Corporation (NASDAQ:ORCL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ORCL is 44. 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 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 gained 30% in 2020 through October 23rd and beat the market by 21 percentage points. Unfortunately ORCL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ORCL were disappointed as the stock returned 9.3% since the end of June (through 10/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.