Hedge Funds Keep Buying Owl Rock Capital Corporation (ORCC)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Owl Rock Capital Corporation (NYSE:ORCC) based on that data and determine whether they were really smart about the stock.

Owl Rock Capital Corporation (NYSE:ORCC) investors should pay attention to an increase in hedge fund sentiment in recent months. ORCC was in 11 hedge funds’ portfolios at the end of March. There were 8 hedge funds in our database with ORCC holdings at the end of the previous quarter. Our calculations also showed that ORCC 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.

If you’d ask most traders, hedge funds are perceived as unimportant, old financial tools of the past. While there are over 8000 funds trading today, Our researchers choose to focus on the upper echelon of this group, about 850 funds. These money managers have their hands on the majority of all hedge funds’ total asset base, and by tailing their finest equity investments, Insider Monkey has discovered numerous investment strategies that have historically beaten the broader indices. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum 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 .


Howard Marks of Oaktree Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a peek at the new hedge fund action encompassing Owl Rock Capital Corporation (NYSE:ORCC).

How are hedge funds trading Owl Rock Capital Corporation (NYSE:ORCC)?

At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in ORCC a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is ORCC A Good Stock To Buy?

More specifically, Blue Pool Capital was the largest shareholder of Owl Rock Capital Corporation (NYSE:ORCC), with a stake worth $78.6 million reported as of the end of September. Trailing Blue Pool Capital was Arrowstreet Capital, which amassed a stake valued at $14.5 million. Marshall Wace LLP, Soros Fund Management, and D E Shaw 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 Blue Pool Capital allocated the biggest weight to Owl Rock Capital Corporation (NYSE:ORCC), around 35.02% of its 13F portfolio. Soros Fund Management is also relatively very bullish on the stock, dishing out 0.47 percent of its 13F equity portfolio to ORCC.

Consequently, key hedge funds have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the largest position in Owl Rock Capital Corporation (NYSE:ORCC). Marshall Wace LLP had $10.6 million invested in the company at the end of the quarter. Renaissance Technologies also made a $1.1 million investment in the stock during the quarter. The other funds with brand new ORCC positions are Howard Marks’s Oaktree Capital Management, Andrew Weiss’s Weiss Asset Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Owl Rock Capital Corporation (NYSE:ORCC) but similarly valued. We will take a look at Elastic N.V. (NYSE:ESTC), WEX Inc (NYSE:WEX), Momo Inc (NASDAQ:MOMO), and Pilgrim’s Pride Corporation (NASDAQ:PPC). All of these stocks’ market caps match ORCC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ESTC 33 835088 -6
WEX 35 354821 10
MOMO 25 585481 -13
PPC 18 122135 -6
Average 27.75 474381 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $474 million. That figure was $119 million in ORCC’s case. WEX Inc (NYSE:WEX) is the most popular stock in this table. On the other hand Pilgrim’s Pride Corporation (NASDAQ:PPC) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Owl Rock Capital Corporation (NYSE:ORCC) is even less popular than PPC. Hedge funds dodged a bullet by taking a bearish stance towards ORCC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately ORCC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ORCC investors were disappointed as the stock returned 10.3% during the second quarter 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 most of these stocks already outperformed the market so far in 2020.

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