Hedge Funds Have Never Been This Bullish On O’Reilly Automotive Inc (ORLY)

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about O’Reilly Automotive Inc (NASDAQ:ORLY) in this article.

Is O’Reilly Automotive Inc (NASDAQ:ORLY) a good investment today? Investors who are in the know are taking a bullish view. The number of long hedge fund positions increased by 17 recently. Our calculations also showed that ORLY isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

To the average investor there are dozens of indicators investors can use to grade their holdings. A pair of the less known indicators are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outpace the market by a very impressive amount (see the details here).

David Abrams

David Abrams of Abrams Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to take a glance at the fresh hedge fund action surrounding O’Reilly Automotive Inc (NASDAQ:ORLY).

What have hedge funds been doing with O’Reilly Automotive Inc (NASDAQ:ORLY)?

Heading into the first quarter of 2020, a total of 64 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ORLY over the last 18 quarters. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is ORLY A Good Stock To Buy?

The largest stake in O’Reilly Automotive Inc (NASDAQ:ORLY) was held by Akre Capital Management, which reported holding $827 million worth of stock at the end of September. It was followed by Abrams Capital Management with a $227.7 million position. Other investors bullish on the company included Diamond Hill Capital, AQR Capital Management, and Citadel Investment Group. 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 7.58% of its 13F portfolio. Abrams Capital Management is also relatively very bullish on the stock, designating 7.07 percent of its 13F equity portfolio to ORLY.

Consequently, some big names have been driving this bullishness. Renaissance Technologies, initiated the most valuable position in O’Reilly Automotive Inc (NASDAQ:ORLY). Renaissance Technologies had $84.1 million invested in the company at the end of the quarter. Jack Woodruff’s Candlestick Capital Management also made a $49.7 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Steve Cohen’s Point72 Asset Management, and Daniel Sundheim’s D1 Capital Partners.

Let’s now take a look at 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 Barrick Gold Corporation (NYSE:GOLD), Southern Copper Corporation (NYSE:SCCO), General Mills, Inc. (NYSE:GIS), and Amphenol Corporation (NYSE:APH). All of these stocks’ market caps are similar to ORLY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GOLD 51 1814507 3
SCCO 20 230399 4
GIS 37 907163 0
APH 36 715909 3
Average 36 916995 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $917 million. That figure was $2319 million in ORLY’s case. Barrick Gold Corporation (NYSE:GOLD) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks O’Reilly Automotive Inc (NASDAQ:ORLY) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Unfortunately ORLY wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ORLY were disappointed as the stock returned -13.7% during the first two months of 2020 (through March 2nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.

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