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Hedge Funds Have Never Been Less Bullish On Oracle Corporation (ORCL)?

In this article we will check out the progression of hedge fund sentiment towards Oracle Corporation (NYSE:ORCL) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Is Oracle Corporation (NYSE:ORCL) an attractive investment right now? Money managers are in a bearish mood. The number of long hedge fund bets went down by 11 lately. Our calculations also showed that ORCL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

In the eyes of most investors, hedge funds are viewed as unimportant, outdated financial vehicles of the past. While there are more than 8000 funds trading today, We look at the bigwigs of this group, around 850 funds. These money managers have their hands on most of the smart money’s total asset base, and by following their top picks, Insider Monkey has brought to light several investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the recent hedge fund action encompassing Oracle Corporation (NYSE:ORCL).

Hedge fund activity in Oracle Corporation (NYSE:ORCL)

Heading into the second quarter of 2020, a total of 48 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ORCL over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Oracle Corporation (NYSE:ORCL) was held by Fisher Asset Management, which reported holding $638.4 million worth of stock at the end of September. It was followed by AQR Capital Management with a $356.4 million position. Other investors bullish on the company included Eagle Capital Management, Yacktman Asset Management, and Pzena Investment Management. In terms of the portfolio weights assigned to each position Yacktman Asset Management allocated the biggest weight to Oracle Corporation (NYSE:ORCL), around 4.37% of its 13F portfolio. International Value Advisers is also relatively very bullish on the stock, earmarking 4.16 percent of its 13F equity portfolio to ORCL.

Seeing as Oracle Corporation (NYSE:ORCL) has experienced bearish sentiment from the smart money, logic holds that there were a few hedge funds that elected to cut their entire stakes heading into Q4. Interestingly, Jonathan Bloomberg’s BloombergSen said goodbye to the largest position of the “upper crust” of funds tracked by Insider Monkey, comprising about $76.6 million in stock. Renaissance Technologies, also cut its stock, about $46 million worth. These transactions are important to note, as total hedge fund interest dropped by 11 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Oracle Corporation (NYSE:ORCL). We will take a look at Novo Nordisk A/S (NYSE:NVO), Abbott Laboratories (NYSE:ABT), Chevron Corporation (NYSE:CVX), and Eli Lilly and Company (NYSE:LLY). This group of stocks’ market values resemble ORCL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NVO 24 3036975 1
ABT 62 2189754 0
CVX 53 1646070 6
LLY 43 1323452 0
Average 45.5 2049063 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.5 hedge funds with bullish positions and the average amount invested in these stocks was $2049 million. That figure was $2438 million in ORCL’s case. Abbott Laboratories (NYSE:ABT) is the most popular stock in this table. On the other hand Novo Nordisk A/S (NYSE:NVO) is the least popular one with only 24 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 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 7.9% in 2020 through May 22nd but beat the market by 15.6 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 9.4% during the same time period 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.

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