Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Opendoor Technologies Inc. (NASDAQ:OPEN) to find out whether there were any major changes in hedge funds’ views.
Opendoor Technologies Inc. (NASDAQ:OPEN) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 33. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. OPEN investors should pay attention to an increase in activity from the world’s largest hedge funds of late. There were 33 hedge funds in our database with OPEN positions at the end of the first quarter. Our calculations also showed that OPEN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Aaron Cowen of Suvretta Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a gander at the key hedge fund action regarding Opendoor Technologies Inc. (NASDAQ:OPEN).
Do Hedge Funds Think OPEN Is A Good Stock To Buy Now?
At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the first quarter of 2020. By comparison, 0 hedge funds held shares or bullish call options in OPEN a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Opendoor Technologies Inc. (NASDAQ:OPEN) was held by ARK Investment Management, which reported holding $179.8 million worth of stock at the end of June. It was followed by Sylebra Capital Management with a $135.2 million position. Other investors bullish on the company included Suvretta Capital Management, Candlestick Capital Management, and Soros Fund Management. In terms of the portfolio weights assigned to each position Sylebra Capital Management allocated the biggest weight to Opendoor Technologies Inc. (NASDAQ:OPEN), around 3.35% of its 13F portfolio. Stamina Capital Management is also relatively very bullish on the stock, earmarking 3.22 percent of its 13F equity portfolio to OPEN.
With a general bullishness amongst the heavyweights, key hedge funds have jumped into Opendoor Technologies Inc. (NASDAQ:OPEN) headfirst. D E Shaw, managed by D. E. Shaw, established the most valuable position in Opendoor Technologies Inc. (NASDAQ:OPEN). D E Shaw had $18 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $16.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Andrew Kurita’s Kettle Hill Capital Management, Jonathan Barrett and Paul Segal’s Luminus Management, and Jack Woodruff’s Candlestick Capital Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Opendoor Technologies Inc. (NASDAQ:OPEN) but similarly valued. We will take a look at Owens Corning (NYSE:OC), East West Bancorp, Inc. (NASDAQ:EWBC), Targa Resources Corp (NYSE:TRGP), Asana Inc. (NYSE:ASAN), Hubbell Incorporated (NYSE:HUBB), Erie Indemnity Company (NASDAQ:ERIE), and Everest Re Group Ltd (NYSE:RE). This group of stocks’ market values are closest to OPEN’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OC | 34 | 425375 | 4 |
| EWBC | 24 | 480255 | -1 |
| TRGP | 26 | 387970 | 2 |
| ASAN | 22 | 592249 | 0 |
| HUBB | 15 | 459124 | 0 |
| ERIE | 15 | 48433 | 3 |
| RE | 30 | 686253 | -2 |
| Average | 23.7 | 439951 | 0.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $440 million. That figure was $765 million in OPEN’s case. Owens Corning (NYSE:OC) is the most popular stock in this table. On the other hand Hubbell Incorporated (NYSE:HUBB) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Opendoor Technologies Inc. (NASDAQ:OPEN) is more popular among hedge funds. Our overall hedge fund sentiment score for OPEN is 87. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 21.8% in 2021 through October 11th but still managed to beat the market by 4.4 percentage points. Hedge funds were also right about betting on OPEN as the stock returned 23.9% since the end of June (through 10/11) 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.
