We can judge whether OneSpaWorld Holdings Limited (NASDAQ:OSW) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Is OneSpaWorld Holdings Limited (NASDAQ:OSW) the right pick for your portfolio? The best stock pickers are getting less bullish. The number of long hedge fund positions went down by 3 lately. Our calculations also showed that OSW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Richard Driehaus of Driehaus Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s review the recent hedge fund action regarding OneSpaWorld Holdings Limited (NASDAQ:OSW).
What does smart money think about OneSpaWorld Holdings Limited (NASDAQ:OSW)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. By comparison, 12 hedge funds held shares or bullish call options in OSW a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Greenhouse Funds was the largest shareholder of OneSpaWorld Holdings Limited (NASDAQ:OSW), with a stake worth $27 million reported as of the end of September. Trailing Greenhouse Funds was Deep Field Asset Management, which amassed a stake valued at $15.2 million. Driehaus Capital, Stormborn Capital Management, and Select Equity 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 Deep Field Asset Management allocated the biggest weight to OneSpaWorld Holdings Limited (NASDAQ:OSW), around 8.2% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, setting aside 5.49 percent of its 13F equity portfolio to OSW.
Due to the fact that OneSpaWorld Holdings Limited (NASDAQ:OSW) has experienced a decline in interest from hedge fund managers, it’s easy to see that there were a few hedge funds who were dropping their positions entirely last quarter. It’s worth mentioning that William Hyatt’s Hudson Way Capital Management cut the biggest stake of the 750 funds followed by Insider Monkey, valued at close to $7 million in stock. Mark Kingdon’s fund, Kingdon Capital, also sold off its stock, about $6.2 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to OneSpaWorld Holdings Limited (NASDAQ:OSW). These stocks are Unitil Corporation (NYSE:UTL), Kelly Services, Inc. (NASDAQ:KELYA), Continental Building Products Inc (NYSE:CBPX), and Seacor Holdings, Inc. (NYSE:CKH). This group of stocks’ market caps are closest to OSW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UTL | 12 | 85939 | 3 |
| KELYA | 13 | 21215 | 3 |
| CBPX | 17 | 81521 | 0 |
| CKH | 13 | 145440 | -1 |
| Average | 13.75 | 83529 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $68 million in OSW’s case. Continental Building Products Inc (NYSE:CBPX) is the most popular stock in this table. On the other hand Unitil Corporation (NYSE:UTL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks OneSpaWorld Holdings Limited (NASDAQ:OSW) is even less popular than UTL. Hedge funds dodged a bullet by taking a bearish stance towards OSW. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately OSW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); OSW investors were disappointed as the stock returned 5.2% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
