We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards ONE Gas Inc (NYSE:OGS).
Is ONE Gas Inc (NYSE:OGS) undervalued? Investors who are in the know are getting less bullish. The number of bullish hedge fund bets fell by 4 in recent months. Our calculations also showed that OGS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). OGS was in 16 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 20 hedge funds in our database with OGS holdings at the end of the previous quarter.
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 more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when 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 recent hedge fund action regarding ONE Gas Inc (NYSE:OGS).
How are hedge funds trading ONE Gas Inc (NYSE:OGS)?
At the end of the fourth quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from one quarter earlier. On the other hand, there were a total of 17 hedge funds with a bullish position in OGS a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Clint Carlson’s Carlson Capital has the biggest position in ONE Gas Inc (NYSE:OGS), worth close to $22.9 million, amounting to 0.4% of its total 13F portfolio. The second largest stake is held by Winton Capital Management, led by David Harding, holding a $13.5 million position; 0.2% of its 13F portfolio is allocated to the company. Some other peers with similar optimism include Noam Gottesman’s GLG Partners, Mario Gabelli’s GAMCO Investors and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Carlson Capital allocated the biggest weight to ONE Gas Inc (NYSE:OGS), around 0.41% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.19 percent of its 13F equity portfolio to OGS.
Judging by the fact that ONE Gas Inc (NYSE:OGS) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there is a sect of money managers who sold off their entire stakes by the end of the third quarter. At the top of the heap, Israel Englander’s Millennium Management dropped the biggest investment of the “upper crust” of funds followed by Insider Monkey, totaling about $15.9 million in stock, and Peter J. Hark’s Shelter Harbor Advisors was right behind this move, as the fund dropped about $2.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to ONE Gas Inc (NYSE:OGS). These stocks are Helmerich & Payne, Inc. (NYSE:HP), Webster Financial Corporation (NYSE:WBS), Spirit Realty Capital Inc (NYSE:SRC), and Pinnacle Financial Partners, Inc. (NASDAQ:PNFP). This group of stocks’ market valuations match OGS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HP | 33 | 633780 | 4 |
| WBS | 24 | 472727 | -1 |
| SRC | 26 | 236430 | 5 |
| PNFP | 16 | 105654 | 0 |
| Average | 24.75 | 362148 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $67 million in OGS’s case. Helmerich & Payne, Inc. (NYSE:HP) is the most popular stock in this table. On the other hand Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks ONE Gas Inc (NYSE:OGS) is even less popular than PNFP. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but managed to beat the market by 5.5 percentage points. A small number of hedge funds were also right about betting on OGS, though not to the same extent, as the stock returned -22.8% during the same time period and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
