The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Norbord Inc. (NYSE:OSB) from the perspective of those successful funds.
Norbord Inc. (NYSE:OSB) has seen a decrease in support from the world’s most successful money managers in recent months. OSB was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 9 hedge funds in our database with OSB holdings at the end of the previous quarter. 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 AllianceBernstein Holding LP (NYSE:AB), Rexnord Corp (NYSE:RXN), and Pampa Energia S.A. (ADR) (NYSE:PAM) to gather more data points.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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How are hedge funds trading Norbord Inc. (NYSE:OSB)?
Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 11% from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards OSB over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Robert Hockett’s Covalent Capital Partners has the biggest position in Norbord Inc. (NYSE:OSB), worth close to $9 million, accounting for 3.5% of its total 13F portfolio. Coming in second is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $5.8 million position. Other hedge funds and institutional investors that hold long positions include Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, Millennium Management, one of the 10 largest hedge funds in the world, and John Overdeck and David Siegel’s Two Sigma Advisors. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually got rid of their positions entirely. Interestingly, Matthew Taylor and Ty Popplewell’s Kortright Capital Partners got rid of the largest investment of all the investors watched by Insider Monkey, comprising about $4.1 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund dumped about $0.7 million worth of shares.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Norbord Inc. (NYSE:OSB) but similarly valued. These stocks are AllianceBernstein Holding LP (NYSE:AB), Rexnord Corp (NYSE:RXN), Pampa Energia S.A. (ADR) (NYSE:PAM), and BancorpSouth, Inc. (NYSE:BXS). All of these stocks’ market caps are similar to OSB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AB | 9 | 30374 | 1 |
| RXN | 16 | 191629 | -3 |
| PAM | 17 | 284757 | -1 |
| BXS | 13 | 179968 | -1 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $172 million. That figure was $28 million in OSB’s case. Pampa Energia S.A. (ADR) (NYSE:PAM) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Norbord Inc. (NYSE:OSB) is even less popular than AB. 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.
Disclosure: None