Is Adobe Inc. (ADBE) A Good Stock To Buy?

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on Adobe Inc. (NASDAQ:ADBE).

Adobe Inc. (NASDAQ:ADBE) was in 106 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 115. ADBE shareholders have witnessed an increase in hedge fund interest of late. There were 104 hedge funds in our database with ADBE holdings at the end of June. Our calculations also showed that ADBE ranks 17th among the 30 most popular stocks among hedge funds (click for Q3 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to review the fresh hedge fund action regarding Adobe Inc. (NASDAQ:ADBE).

How are hedge funds trading Adobe Inc. (NASDAQ:ADBE)?

Heading into the fourth quarter of 2020, a total of 106 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from one quarter earlier. On the other hand, there were a total of 102 hedge funds with a bullish position in ADBE a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the most valuable position in Adobe Inc. (NASDAQ:ADBE). Fisher Asset Management has a $2.7168 billion position in the stock, comprising 2.4% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, managed by Ken Griffin, which holds a $851.5 million call position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism encompass Lone Pine Capital, Rajiv Jain’s GQG Partners and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Center Lake Capital allocated the biggest weight to Adobe Inc. (NASDAQ:ADBE), around 11.14% of its 13F portfolio. Keywise Capital Management is also relatively very bullish on the stock, setting aside 10.88 percent of its 13F equity portfolio to ADBE.

As aggregate interest increased, key money managers have jumped into Adobe Inc. (NASDAQ:ADBE) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, established the largest position in Adobe Inc. (NASDAQ:ADBE). PEAK6 Capital Management had $89.9 million invested in the company at the end of the quarter. Kevin Cottrell and Chris LaSusa’s KCL Capital also made a $18.4 million investment in the stock during the quarter. The following funds were also among the new ADBE investors: Anand Parekh’s Alyeska Investment Group, Chris Rokos’s Rokos Capital Management, and Parsa Kiai’s Steamboat Capital Partners.

Let’s also examine hedge fund activity in other stocks similar to Adobe Inc. (NASDAQ:ADBE). We will take a look at Paypal Holdings Inc (NASDAQ:PYPL),, inc. (NYSE:CRM), The Walt Disney Company (NYSE:DIS), Netflix, Inc. (NASDAQ:NFLX), Intel Corporation (NASDAQ:INTC), The Coca-Cola Company (NYSE:KO), and Comcast Corporation (NASDAQ:CMCSA). This group of stocks’ market caps resemble ADBE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PYPL 150 11476857 6
CRM 106 11087534 -1
DIS 112 8983570 7
NFLX 104 12878421 -9
INTC 66 4342499 -12
KO 60 22014756 1
CMCSA 82 8148816 2
Average 97.1 11276065 -0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 97.1 hedge funds with bullish positions and the average amount invested in these stocks was $11276 million. That figure was $10503 million in ADBE’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand The Coca-Cola Company (NYSE:KO) is the least popular one with only 60 bullish hedge fund positions. Adobe Inc. (NASDAQ:ADBE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADBE is 67.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and beat the market again by 15.4 percentage points. Unfortunately ADBE wasn’t nearly as successful as these 20 stocks and hedge funds that were betting on ADBE were disappointed as the stock returned -6.1% since the end of September (through 11/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of the top 20 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.