The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Orion Engineered Carbons SA (NYSE:OEC) based on those filings.
Is Orion Engineered Carbons SA (NYSE:OEC) worth your attention right now? The smart money is becoming hopeful. The number of bullish hedge fund positions moved up by 3 lately. Our calculations also showed that OEC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jonathan Barrett of Luminus Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a glance at the fresh hedge fund action encompassing Orion Engineered Carbons SA (NYSE:OEC).
How are hedge funds trading Orion Engineered Carbons SA (NYSE:OEC)?
Heading into the second quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the fourth quarter of 2019. On the other hand, there were a total of 23 hedge funds with a bullish position in OEC a year ago. So, let’s check out 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, Renaissance Technologies has the largest position in Orion Engineered Carbons SA (NYSE:OEC), worth close to $31.1 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by First Pacific Advisors LLC, led by Robert Rodriguez and Steven Romick, holding a $26.5 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of Tony Davis’s Inherent Group, Jonathan Barrett and Paul Segal’s Luminus Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Inherent Group allocated the biggest weight to Orion Engineered Carbons SA (NYSE:OEC), around 13.19% of its 13F portfolio. Harvey Partners is also relatively very bullish on the stock, designating 2.79 percent of its 13F equity portfolio to OEC.
As aggregate interest increased, key money managers were breaking ground themselves. Luminus Management, managed by Jonathan Barrett and Paul Segal, assembled the most valuable position in Orion Engineered Carbons SA (NYSE:OEC). Luminus Management had $7.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $2 million position during the quarter. The other funds with brand new OEC positions are Ken Griffin’s Citadel Investment Group, Greg Eisner’s Engineers Gate Manager, and Robert Vincent McHugh’s Jade Capital Advisors.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Orion Engineered Carbons SA (NYSE:OEC) but similarly valued. We will take a look at GTT Communications Inc (NYSE:GTT), BioXcel Therapeutics, Inc. (NASDAQ:BTAI), Urstadt Biddle Properties Inc. (NYSE:UBP), and SurModics, Inc. (NASDAQ:SRDX). This group of stocks’ market valuations resemble OEC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GTT | 10 | 145022 | -8 |
| BTAI | 10 | 35609 | 7 |
| UBP | 1 | 979 | 0 |
| SRDX | 12 | 120004 | -5 |
| Average | 8.25 | 75404 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $105 million in OEC’s case. SurModics, Inc. (NASDAQ:SRDX) is the most popular stock in this table. On the other hand Urstadt Biddle Properties Inc. (NYSE:UBP) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Orion Engineered Carbons SA (NYSE:OEC) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on OEC as the stock returned 44.9% so far in Q2 (through June 17th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
