It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Total Return Index ETFs returned approximately 27.5% in 2019 (through the end of November). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 37.4% during the same 11-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Oppenheimer Holdings Inc. (NYSE:OPY).
Hedge fund interest in Oppenheimer Holdings Inc. (NYSE:OPY) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare OPY to other stocks including Greenlight Capital Re, Ltd. (NASDAQ:GLRE), Unisys Corporation (NYSE:UIS), and Collegium Pharmaceutical Inc (NASDAQ:COLL) to get a better sense of its popularity.
Video: Click the image to 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 hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to review the recent hedge fund action regarding Oppenheimer Holdings Inc. (NYSE:OPY).
What have hedge funds been doing with Oppenheimer Holdings Inc. (NYSE:OPY)?
At Q3’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. By comparison, 11 hedge funds held shares or bullish call options in OPY a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Oppenheimer Holdings Inc. (NYSE:OPY) was held by Renaissance Technologies, which reported holding $14.1 million worth of stock at the end of September. It was followed by AQR Capital Management with a $7.2 million position. Other investors bullish on the company included Arrowstreet Capital, GLG Partners, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position GLG Partners allocated the biggest weight to Oppenheimer Holdings Inc. (NYSE:OPY), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to OPY.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was PEAK6 Capital Management).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Oppenheimer Holdings Inc. (NYSE:OPY) but similarly valued. These stocks are Greenlight Capital Re, Ltd. (NASDAQ:GLRE), Unisys Corporation (NYSE:UIS), Collegium Pharmaceutical Inc (NASDAQ:COLL), and Genco Shipping & Trading Limited (NYSE:GNK). This group of stocks’ market values are similar to OPY’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLRE | 12 | 11627 | 4 |
| UIS | 24 | 43021 | 8 |
| COLL | 13 | 63291 | -3 |
| GNK | 11 | 210512 | -1 |
| Average | 15 | 82113 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $82 million. That figure was $33 million in OPY’s case. Unisys Corporation (NYSE:UIS) is the most popular stock in this table. On the other hand Genco Shipping & Trading Limited (NYSE:GNK) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Oppenheimer Holdings Inc. (NYSE:OPY) is even less popular than GNK. Hedge funds dodged a bullet by taking a bearish stance towards OPY. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately OPY wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); OPY investors were disappointed as the stock returned -4.7% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
