The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Office Depot Inc (NYSE:ODP) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is Office Depot Inc (NYSE:ODP) an excellent investment now? The best stock pickers are turning bullish. The number of bullish hedge fund bets moved up by 5 in recent months. Our calculations also showed that odp isn’t among the 30 most popular stocks among hedge funds. ODP was in 20 hedge funds’ portfolios at the end of the third quarter of 2018. There were 15 hedge funds in our database with ODP positions at the end of the previous quarter.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
Let’s take a glance at the fresh hedge fund action regarding Office Depot Inc (NYSE:ODP).
Hedge fund activity in Office Depot Inc (NYSE:ODP)
At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. On the other hand, there were a total of 21 hedge funds with a bullish position in ODP at the beginning of this year. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Paulson & Co was the largest shareholder of Office Depot Inc (NYSE:ODP), with a stake worth $32.1 million reported as of the end of September. Trailing Paulson & Co was Laurion Capital Management, which amassed a stake valued at $26.8 million. AQR Capital Management, Marshall Wace LLP, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Consequently, specific money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in Office Depot Inc (NYSE:ODP). Marshall Wace LLP had $13.6 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $1.5 million position during the quarter. The other funds with brand new ODP positions are Matthew Hulsizer’s PEAK6 Capital Management, Philippe Laffont’s Coatue Management, and Guy Shahar’s DSAM Partners.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Office Depot Inc (NASDAQ:ODP) but similarly valued. We will take a look at Spectrum Pharmaceuticals, Inc. (NASDAQ:SPPI), Talos Energy, Inc. (NYSE:TALO), Zogenix, Inc. (NASDAQ:ZGNX), and Amkor Technology, Inc. (NASDAQ:AMKR). This group of stocks’ market caps resemble ODP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SPPI | 23 | 235884 | 5 |
| TALO | 14 | 99864 | 2 |
| ZGNX | 37 | 1091823 | 6 |
| AMKR | 18 | 47926 | 5 |
| Average | 23 | 368874 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $369 million. That figure was $118 million in ODP’s case. Zogenix, Inc. (NASDAQ:ZGNX) is the most popular stock in this table. On the other hand Talos Energy, Inc. (NYSE:TALO) is the least popular one with only 14 bullish hedge fund positions. Office Depot Inc (NASDAQ:ODP) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ZGNX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
