Were Hedge Funds Right About Oracle Corporation (ORCL)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind let’s see whether Oracle Corporation (NYSE:ORCL) represents a good buying opportunity at the moment. Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Oracle Corporation (NYSE:ORCL) investors should be aware of an increase in activity from the world’s largest hedge funds lately. ORCL was in 59 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 56 hedge funds in our database with ORCL holdings at the end of the previous quarter. Our calculations also showed that ORCL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Yacktman of Yacktman Asset Management

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the fresh hedge fund action surrounding Oracle Corporation (NYSE:ORCL).

What does smart money think about Oracle Corporation (NYSE:ORCL)?

At the end of the fourth quarter, a total of 59 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ORCL over the last 18 quarters. So, let’s see 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 $845.8 million worth of stock at the end of September. It was followed by Eagle Capital Management with a $823.8 million position. Other investors bullish on the company included AQR 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 5.05% of its 13F portfolio. BloombergSen is also relatively very bullish on the stock, setting aside 3.92 percent of its 13F equity portfolio to ORCL.

Consequently, some big names were leading the bulls’ herd. Renaissance Technologies, initiated the most valuable position in Oracle Corporation (NYSE:ORCL). Renaissance Technologies had $46 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also made a $5.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Ali Motamed’s Invenomic Capital Management, Matthew Tewksbury’s Stevens Capital Management, and Nathan Przybylo’s L2 Asset Management.

Let’s check out hedge fund activity in other stocks similar to Oracle Corporation (NYSE:ORCL). These stocks are SAP SE (NYSE:SAP), Anheuser-Busch InBev SA/NV (NYSE:BUD), Adobe Inc. (NASDAQ:ADBE), and HSBC Holdings plc (NYSE:HSBC). This group of stocks’ market values are similar to ORCL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAP 16 1763846 -4
BUD 23 1478846 2
ADBE 106 9784116 4
HSBC 18 1118976 2
Average 40.75 3536446 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.75 hedge funds with bullish positions and the average amount invested in these stocks was $3536 million. That figure was $3720 million in ORCL’s case. Adobe Inc. (NASDAQ:ADBE) is the most popular stock in this table. On the other hand SAP SE (NYSE:SAP) is the least popular one with only 16 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. 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 lost 1.0% in 2020 through April 20th but still beat the market by 11 percentage points. Hedge funds were also right about betting on ORCL as the stock returned 2.7% in 2020 (through April 20th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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