Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards O’Reilly Automotive Inc (NASDAQ:ORLY) at the end of the third quarter and determine whether the smart money was really smart about this stock.
O’Reilly Automotive Inc (NASDAQ:ORLY) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 44 hedge funds’ portfolios at the end of the third quarter of 2021. 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.
Cliff Asness of AQR Capital Management
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 analyze the fresh 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 the second quarter of 2021. On the other hand, there were a total of 58 hedge funds with a bullish position in ORLY a year ago. So, let’s see 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, Akre Capital Management, managed by Charles Akre, holds the biggest position in O’Reilly Automotive Inc (NASDAQ:ORLY). Akre Capital Management has a $964.7 million position in the stock, comprising 5.9% of its 13F portfolio. On Akre Capital Management’s heels is Renaissance Technologies, with a $162 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass 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.
Seeing as O’Reilly Automotive Inc (NASDAQ:ORLY) has experienced declining sentiment from hedge fund managers, it’s safe to say that there were a few funds that slashed their full holdings in the third quarter. Interestingly, Brian Scudieri’s Kehrs Ridge Capital dropped the largest investment of all the hedgies monitored by Insider Monkey, totaling close to $8.5 million in call options. D. E. Shaw’s fund, D E Shaw, also said goodbye to its call options, about $5.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as O’Reilly Automotive Inc (NASDAQ:ORLY) but similarly valued. We will take a look at 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 values resemble ORLY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CDNS | 33 | 1922561 | 0 |
| ROKU | 57 | 2828579 | -4 |
| SLB | 39 | 1062933 | -2 |
| LCID | 18 | 432623 | 18 |
| TT | 39 | 1147583 | 2 |
| DLR | 28 | 253530 | -2 |
| WBA | 37 | 850173 | -4 |
| Average | 35.9 | 1213997 | 1.1 |
View table here if you experience formatting issues.
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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on ORLY as the stock returned 6.7% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
