The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 866 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31st holdings, data that is available nowhere else. Should you consider Adobe Inc. (NASDAQ:ADBE) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is Adobe Inc. (NASDAQ:ADBE) a buy, sell, or hold? Hedge funds were becoming less hopeful. The number of long hedge fund positions shrunk by 7 lately. Adobe Inc. (NASDAQ:ADBE) was in 107 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 115. Our calculations also showed that ADBE ranked 16th among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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 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 we’re going to take a look at the latest hedge fund action surrounding Adobe Inc. (NASDAQ:ADBE).
Do Hedge Funds Think ADBE Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 107 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in ADBE over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Adobe Inc. (NASDAQ:ADBE), which was worth $2851.1 million at the end of the fourth quarter. On the second spot was Lone Pine Capital which amassed $1246.6 million worth of shares. Arrowstreet Capital, Akre Capital Management, and GQG Partners 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 Center Lake Capital allocated the biggest weight to Adobe Inc. (NASDAQ:ADBE), around 13.2% of its 13F portfolio. Keywise Capital Management is also relatively very bullish on the stock, setting aside 11.7 percent of its 13F equity portfolio to ADBE.
Due to the fact that Adobe Inc. (NASDAQ:ADBE) has faced bearish sentiment from the smart money, logic holds that there were a few hedgies that decided to sell off their full holdings by the end of the first quarter. At the top of the heap, Gabriel Plotkin’s Melvin Capital Management cut the biggest stake of the 750 funds followed by Insider Monkey, totaling about $341.7 million in stock, and Dan Loeb’s Third Point was right behind this move, as the fund dropped about $227.6 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 7 funds by the end of the first quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Adobe Inc. (NASDAQ:ADBE) but similarly valued. These stocks are The Coca-Cola Company (NYSE:KO), Cisco Systems, Inc. (NASDAQ:CSCO), Toyota Motor Corporation (NYSE:TM), AT&T Inc. (NYSE:T), Abbott Laboratories (NYSE:ABT), NIKE, Inc. (NYSE:NKE), and Oracle Corporation (NASDAQ:ORCL). This group of stocks’ market valuations match ADBE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KO | 61 | 24903946 | -1 |
| CSCO | 59 | 5194074 | -1 |
| TM | 18 | 824174 | 7 |
| T | 63 | 2701777 | 5 |
| ABT | 65 | 5136552 | 1 |
| NKE | 78 | 5176711 | -4 |
| ORCL | 52 | 2888444 | 0 |
| Average | 56.6 | 6689383 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 56.6 hedge funds with bullish positions and the average amount invested in these stocks was $6689 million. That figure was $12112 million in ADBE’s case. NIKE, Inc. (NYSE:NKE) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Adobe Inc. (NASDAQ:ADBE) is more popular among hedge funds. Our overall hedge fund sentiment score for ADBE is 90.4. 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 returned 25.8% in 2021 through August 6th but still managed to beat the market by 6.7 percentage points. Hedge funds were also right about betting on ADBE as the stock returned 32.8% since the end of March (through 8/6) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
