Oracle Corporation (ORCL): Hedge Funds In Wait-and-See Mode

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. Insider Monkey finished processing 866 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Oracle Corporation (NASDAQ:ORCL).

Hedge fund interest in Oracle Corporation (NASDAQ:ORCL) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ORCL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Pfizer Inc. (NYSE:PFE), Chevron Corporation (NYSE:CVX), and PepsiCo, Inc. (NYSE:PEP) to gather more data points.

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.

Alex Sacerdote of Whale Rock Capital Management

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Do Hedge Funds Think ORCL Is A Good Stock To Buy Now?

At the end of March, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ORCL over the last 23 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ORCL A Good Stock To Buy?

Among these funds, Fisher Asset Management held the most valuable stake in Oracle Corporation (NASDAQ:ORCL), which was worth $1006.4 million at the end of the fourth quarter. On the second spot was Whale Rock Capital Management which amassed $364.1 million worth of shares. AQR Capital Management, Pzena Investment Management, and Citadel Investment Group 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 Amitell Capital allocated the biggest weight to Oracle Corporation (NASDAQ:ORCL), around 3.15% of its 13F portfolio. Whale Rock Capital Management is also relatively very bullish on the stock, earmarking 2.99 percent of its 13F equity portfolio to ORCL.

Seeing as Oracle Corporation (NASDAQ:ORCL) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there is a sect of fund managers who sold off their entire stakes last quarter. Interestingly, Robert Pohly’s Samlyn Capital said goodbye to the biggest stake of the “upper crust” of funds tracked by Insider Monkey, comprising an estimated $91.2 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $36.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks similar to Oracle Corporation (NASDAQ:ORCL). These stocks are Pfizer Inc. (NYSE:PFE), Chevron Corporation (NYSE:CVX), PepsiCo, Inc. (NYSE:PEP),, inc. (NYSE:CRM), Merck & Co., Inc. (NYSE:MRK), Novartis AG (NYSE:NVS), and AbbVie Inc (NYSE:ABBV). This group of stocks’ market values match ORCL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PFE 65 2014186 2
CVX 41 4866758 -9
PEP 61 4882404 5
CRM 91 8837040 -6
MRK 79 6494373 -3
NVS 19 1709243 -4
ABBV 72 5916781 -11
Average 61.1 4960112 -3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 61.1 hedge funds with bullish positions and the average amount invested in these stocks was $4960 million. That figure was $2888 million in ORCL’s case., inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Novartis AG (NYSE:NVS) is the least popular one with only 19 bullish hedge fund positions. Oracle Corporation (NASDAQ:ORCL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ORCL is 49. 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 gained 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on ORCL as the stock returned 18.7% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.

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