Were Hedge Funds Right About Piling Into O’Reilly Automotive Inc (ORLY)?

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. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about O’Reilly Automotive Inc (NASDAQ:ORLY) in this article.

Is O’Reilly Automotive Inc (NASDAQ:ORLY) an attractive stock to buy now? Investors who are in the know are in an optimistic mood. The number of long hedge fund positions moved up by 17 in recent months. Our calculations also showed that ORLY 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). ORLY was in 64 hedge funds’ portfolios at the end of December. There were 47 hedge funds in our database with ORLY holdings at the end of the previous quarter.

In today’s marketplace there are several tools market participants use to assess their holdings. Some of the most innovative tools are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the elite money managers can beat their index-focused peers by a superb margin (see the details here).

Daniel Sundheim D1 Capital

Daniel Sundheim of D1 Capital Partners

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. Blockchain technology is about to go mainstream and reach heavy adoption, so we check out this tech investor’s blockchain stock pick. 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. Now we’re going to go over the latest hedge fund action regarding O’Reilly Automotive Inc (NASDAQ:ORLY).

What have hedge funds been doing with O’Reilly Automotive Inc (NASDAQ:ORLY)?

Heading into the first quarter of 2020, a total of 64 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 36% from one quarter earlier. On the other hand, there were a total of 45 hedge funds with a bullish position in ORLY a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Akre Capital Management, managed by Charles Akre, holds the number one position in O’Reilly Automotive Inc (NASDAQ:ORLY). Akre Capital Management has a $827 million position in the stock, comprising 7.6% of its 13F portfolio. The second most bullish fund manager is David Abrams of Abrams Capital Management, with a $227.7 million position; the fund has 7.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish contain Ric Dillon’s Diamond Hill Capital, Cliff Asness’s AQR Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Akre Capital Management allocated the biggest weight to O’Reilly Automotive Inc (NASDAQ:ORLY), around 7.58% of its 13F portfolio. Abrams Capital Management is also relatively very bullish on the stock, designating 7.07 percent of its 13F equity portfolio to ORLY.

Consequently, specific money managers were leading the bulls’ herd. Renaissance Technologies, founded by Jim Simons, assembled the biggest position in O’Reilly Automotive Inc (NASDAQ:ORLY). Renaissance Technologies had $84.1 million invested in the company at the end of the quarter. Jack Woodruff’s Candlestick Capital Management also initiated a $49.7 million position during the quarter. The following funds were also among the new ORLY investors: John Overdeck and David Siegel’s Two Sigma Advisors, Steve Cohen’s Point72 Asset Management, and Daniel Sundheim’s D1 Capital Partners.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as O’Reilly Automotive Inc (NASDAQ:ORLY) but similarly valued. We will take a look at Barrick Gold Corporation (NYSE:GOLD), Southern Copper Corporation (NYSE:SCCO), General Mills, Inc. (NYSE:GIS), and Amphenol Corporation (NYSE:APH). This group of stocks’ market valuations are similar to ORLY’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GOLD 51 1814507 3
SCCO 20 230399 4
GIS 37 907163 0
APH 36 715909 3
Average 36 916995 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 36 hedge funds with bullish positions and the average amount invested in these stocks was $917 million. That figure was $2319 million in ORLY’s case. Barrick Gold Corporation (NYSE:GOLD) is the most popular stock in this table. On the other hand Southern Copper Corporation (NYSE:SCCO) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks O’Reilly Automotive Inc (NASDAQ:ORLY) is more popular among hedge funds. 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 and still beat the market by 11 percentage points. Unfortunately ORLY wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ORLY were disappointed as the stock returned -14.7% during the three months of 2020 (through April 20th) 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 in 2020.
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.