Is Adobe Inc. (ADBE) Going to Burn These Hedge Funds?

·5 min read

In this article you are going to find out whether hedge funds think Adobe Inc. (NASDAQ:ADBE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Adobe Inc. (NASDAQ:ADBE) shareholders have witnessed an increase in activity from the world's largest hedge funds recently. Adobe Inc. (NASDAQ:ADBE) was in 95 hedge funds' portfolios at the end of September. The all time high for this statistic is 115. Our calculations also showed that ADBE ranked 21st among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now we're going to review the latest hedge fund action regarding Adobe Inc. (NASDAQ:ADBE).

Peter Rathjens Arrowstreet Capital 394
Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

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

At the end of September, a total of 95 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. On the other hand, there were a total of 106 hedge funds with a bullish position in ADBE a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Adobe Inc. (NASDAQ:ADBE) was held by Fisher Asset Management, which reported holding $3704.5 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $1377.9 million position. Other investors bullish on the company included Lone Pine Capital, Akre Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Center Lake Capital allocated the biggest weight to Adobe Inc. (NASDAQ:ADBE), around 11.23% of its 13F portfolio. Atalan Capital is also relatively very bullish on the stock, designating 10.59 percent of its 13F equity portfolio to ADBE.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Adobe Inc. (NASDAQ:ADBE) headfirst. Renaissance Technologies, initiated the most valuable position in Adobe Inc. (NASDAQ:ADBE). Renaissance Technologies had $593.2 million invested in the company at the end of the quarter. Mikal Patel's Oribel Capital Management also made a $58.1 million investment in the stock during the quarter. The other funds with new positions in the stock are Jinghua Yan's TwinBeech Capital, Mika Toikka's AlphaCrest Capital Management, and Brad Farber's Atika Capital.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Adobe Inc. (NASDAQ:ADBE) but similarly valued. These stocks are Netflix, Inc. (NASDAQ:NFLX), salesforce.com, inc. (NYSE:CRM), Comcast Corporation (NASDAQ:CMCSA), Royal Dutch Shell plc (NYSE:RDS), Exxon Mobil Corporation (NYSE:XOM), Toyota Motor Corporation (NYSE:TM), and Pfizer Inc. (NYSE:PFE). This group of stocks' market valuations are similar to ADBE's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NFLX,106,14759355,-7 CRM,119,14900848,11 CMCSA,75,8547154,-9 RDS,33,2053904,-5 XOM,64,4640444,-4 TM,10,876130,-2 PFE,74,2662716,7 Average,68.7,6920079,-1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 68.7 hedge funds with bullish positions and the average amount invested in these stocks was $6920 million. That figure was $12682 million in ADBE's case. salesforce.com, inc. (NYSE:CRM) is the most popular stock in this table. On the other hand Toyota Motor Corporation (NYSE:TM) is the least popular one with only 10 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 73.8. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on ADBE as the stock returned 16.3% since the end of Q3 (through 11/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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