We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. That’s a big deal.This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.
Norbord Inc. (NYSE:OSB) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds’ portfolios at the end of September. 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 Mack Cali Realty Corp (NYSE:CLI), International Speedway Corporation (NASDAQ:ISCA), and iRhythm Technologies, Inc. (NASDAQ:IRTC) to gather more data points. Our calculations also showed that OSB isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
According to most stock holders, hedge funds are seen as unimportant, outdated investment tools of years past. While there are greater than 8000 funds in operation at present, We hone in on the aristocrats of this group, about 750 funds. These investment experts oversee the majority of the smart money’s total asset base, and by paying attention to their unrivaled picks, Insider Monkey has unearthed many investment strategies that have historically outpaced Mr. Market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
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 as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind let’s take a peek at the key hedge fund action encompassing Norbord Inc. (NYSE:OSB).
What have hedge funds been doing with Norbord Inc. (NYSE:OSB)?
Heading into the fourth quarter of 2019, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in OSB a year ago. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in Norbord Inc. (NYSE:OSB) was held by Renaissance Technologies, which reported holding $8.5 million worth of stock at the end of September. It was followed by Millennium Management with a $4.3 million position. Other investors bullish on the company included Two Sigma Advisors, Arrowstreet Capital, and Weiss Asset Management. In terms of the portfolio weights assigned to each position Weiss Asset Management allocated the biggest weight to Norbord Inc. (NYSE:OSB), around 0.02% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to OSB.
Since Norbord Inc. (NYSE:OSB) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedgies who sold off their full holdings in the third quarter. Intriguingly, Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors dumped the biggest stake of the 750 funds monitored by Insider Monkey, worth an estimated $0.8 million in stock. Joel Greenblatt’s fund, Gotham Asset Management, also cut its stock, about $0.4 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Norbord Inc. (NYSE:OSB) but similarly valued. We will take a look at Mack Cali Realty Corp (NYSE:CLI), International Speedway Corporation (NASDAQ:ISCA), iRhythm Technologies, Inc. (NASDAQ:IRTC), and Sunrun Inc (NASDAQ:RUN). This group of stocks’ market values match OSB’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CLI | 13 | 139793 | 0 |
| ISCA | 15 | 217768 | 1 |
| IRTC | 17 | 195889 | 1 |
| RUN | 18 | 582758 | 1 |
| Average | 15.75 | 284052 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $15 million in OSB’s case. Sunrun Inc (NASDAQ:RUN) is the most popular stock in this table. On the other hand Mack Cali Realty Corp (NYSE:CLI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Norbord Inc. (NYSE:OSB) is even less popular than CLI. Hedge funds clearly dropped the ball on OSB as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on OSB as the stock returned 19.4% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
