Do Hedge Funds Love Park-Ohio Holdings Corp. (PKOH)?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Park-Ohio Holdings Corp. (NASDAQ:PKOH).

Hedge fund interest in Park-Ohio Holdings Corp. (NASDAQ:PKOH) shares was flat at the end of last quarter. A lot can be credited to the poor performance of the stock, which dropped 40.45% during the third quarter. This is usually a negative indicator, so we will try to cover the hedge funds that had positions in Park-Ohio Holdings Corp. (NASDAQ:PKOH) at the end of September.

The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as Citi Trends, Inc. (NASDAQ:CTRN), Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), and First Foundation Inc (NASDAQ:FFWM) to gather more data points.

In the financial world, there are a lot of methods shareholders employ to grade their holdings. A pair of the less known methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the top picks of the top fund managers can outpace the S&P 500 by a very impressive margin (see the details here).

Keeping this in mind, we’re going to take a look at the new action surrounding Park-Ohio Holdings Corp. (NASDAQ:PKOH).

What have hedge funds been doing with Park-Ohio Holdings Corp. (NASDAQ:PKOH)?

At the end of Q3, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the most valuable position in Park-Ohio Holdings Corp. (NASDAQ:PKOH). GAMCO Investors has a $25.2 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, holding a $5 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions encompass Israel Englander’s Millennium Management, Dmitry Balyasny’s Balyasny Asset Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Whitebox Advisors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically, a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case here because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Balyasny Asset Management).

Let’s also examine hedge fund activity in other stocks similar to Park-Ohio Holdings Corp. (NASDAQ:PKOH). These stocks are Citi Trends, Inc. (NASDAQ:CTRN), Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), First Foundation Inc (NASDAQ:FFWM), and Bazaarvoice Inc (NASDAQ:BV). This group of stocks’ market values resemble Park-Ohio Holdings Corp. (NASDAQ:PKOH)’s market value.

As you can see, these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $32 million in Park-Ohio Holdings Corp. (NASDAQ:PKOH)’s case. Citi Trends, Inc. (NASDAQ:CTRN) is the most popular stock in this table. On the other hand, First Foundation Inc (NASDAQ:FFWM) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks, Park-Ohio Holdings Corp. (NASDAQ:PKOH) is even less popular than First Foundation Inc (NASDAQ:FFWM). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.