Were Hedge Funds Right About Piling Into Okta, Inc. (OKTA)?

In this article we will check out the progression of hedge fund sentiment towards Okta, Inc. (NASDAQ:OKTA) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

Okta, Inc. (NASDAQ:OKTA) was in 61 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 60. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. OKTA investors should pay attention to an increase in hedge fund interest of late. There were 51 hedge funds in our database with OKTA positions at the end of the third quarter. Our calculations also showed that OKTA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let’s take a peek at the recent hedge fund action regarding Okta, Inc. (NASDAQ:OKTA).

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

At the end of the fourth quarter, a total of 61 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OKTA over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is OKTA A Good Stock To Buy?

Of the funds tracked by Insider Monkey, SCGE Management, managed by Christopher Lyle, holds the largest position in Okta, Inc. (NASDAQ:OKTA). SCGE Management has a $397.2 million position in the stock, comprising 4.6% of its 13F portfolio. On SCGE Management’s heels is Alkeon Capital Management, managed by Panayotis Takis Sparaggis, which holds a $330.2 million position; 0.5% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism encompass Nancy Zevenbergen’s Zevenbergen Capital Investments, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Robert Pitts’s Steadfast Capital Management. In terms of the portfolio weights assigned to each position SQN Investors allocated the biggest weight to Okta, Inc. (NASDAQ:OKTA), around 6.3% of its 13F portfolio. Night Owl Capital Management is also relatively very bullish on the stock, earmarking 5.27 percent of its 13F equity portfolio to OKTA.

With a general bullishness amongst the heavyweights, key hedge funds were leading the bulls’ herd. Steadfast Capital Management, managed by Robert Pitts, established the largest position in Okta, Inc. (NASDAQ:OKTA). Steadfast Capital Management had $155.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $25.8 million position during the quarter. The other funds with brand new OKTA positions are Amit Nitin Doshi’s Harbor Spring Capital, Suraj Parkash Chopra’s Force Hill Capital Management, and Amir Mokari’s Emerson Point Capital.

Let’s go over hedge fund activity in other stocks similar to Okta, Inc. (NASDAQ:OKTA). These stocks are Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), O’Reilly Automotive Inc (NASDAQ:ORLY), Yum! Brands, Inc. (NYSE:YUM), Carrier Global Corporation (NYSE:CARR), American International Group Inc (NYSE:AIG), Banco Santander (Brasil) SA (NYSE:BSBR), and Mizuho Financial Group Inc. (NYSE:MFG). All of these stocks’ market caps match OKTA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBVA 9 196955 -1
ORLY 49 2416443 -9
YUM 33 1199106 -9
CARR 52 2284818 3
AIG 41 2081359 3
BSBR 6 6844 1
MFG 5 14769 0
Average 27.9 1171471 -1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $1171 million. That figure was $2309 million in OKTA’s case. Carrier Global Corporation (NYSE:CARR) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Okta, Inc. (NASDAQ:OKTA) is more popular among hedge funds. Our overall hedge fund sentiment score for OKTA is 90. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Unfortunately OKTA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on OKTA were disappointed as the stock returned 6.1% since the end of the fourth quarter (through 4/30) 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 since 2019.

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