How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Oil-Dri Corporation of America (NYSE:ODC).
Oil-Dri Corporation of America (NYSE:ODC) has seen a decrease in activity from the world’s largest hedge funds lately. Oil-Dri Corporation of America (NYSE:ODC) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 6. There were 5 hedge funds in our database with ODC holdings at the end of June. Our calculations also showed that ODC isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
In the eyes of most shareholders, hedge funds are assumed to be unimportant, outdated investment tools of the past. While there are greater than 8000 funds in operation at present, Our researchers hone in on the top tier of this club, around 850 funds. Most estimates calculate that this group of people control bulk of all hedge funds’ total capital, and by watching their unrivaled investments, Insider Monkey has revealed many investment strategies that have historically outstripped the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website. Now we’re going to check out the latest hedge fund action regarding Oil-Dri Corporation of America (NYSE:ODC).
What have hedge funds been doing with Oil-Dri Corporation of America (NYSE:ODC)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ODC over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Mario Gabelli’s GAMCO Investors has the number one position in Oil-Dri Corporation of America (NYSE:ODC), worth close to $17.8 million, accounting for 0.2% of its total 13F portfolio. Coming in second of Renaissance Technologies, with a $13.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that hold long positions comprise Israel Englander’s Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and . In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Oil-Dri Corporation of America (NYSE:ODC), around 0.2% 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 ODC.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Royce & Associates. 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 none of the 750+ hedge funds tracked by Insider Monkey identified ODC as a viable investment and initiated a position in the stock.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Oil-Dri Corporation of America (NYSE:ODC) but similarly valued. These stocks are Hamilton Beach Brands Holding Company (NYSE:HBB), Verso Corporation (NYSE:VRS), Selecta Biosciences, Inc. (NASDAQ:SELB), Turtle Beach Corp (NASDAQ:HEAR), Citi Trends, Inc. (NASDAQ:CTRN), Agile Therapeutics Inc (NASDAQ:AGRX), and NuCana plc (NASDAQ:NCNA). All of these stocks’ market caps match ODC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HBB | 8 | 5936 | 1 |
| VRS | 15 | 50832 | 0 |
| SELB | 18 | 63282 | -1 |
| HEAR | 13 | 39126 | 0 |
| CTRN | 17 | 45754 | 4 |
| AGRX | 9 | 53501 | -1 |
| NCNA | 8 | 23107 | 4 |
| Average | 12.6 | 40220 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.6 hedge funds with bullish positions and the average amount invested in these stocks was $40 million. That figure was $32 million in ODC’s case. Selecta Biosciences, Inc. (NASDAQ:SELB) is the most popular stock in this table. On the other hand Hamilton Beach Brands Holding Company (NYSE:HBB) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Oil-Dri Corporation of America (NYSE:ODC) is even less popular than HBB. Our overall hedge fund sentiment score for ODC is 24. 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. Hedge funds dodged a bullet by taking a bearish stance towards ODC. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th but managed to beat the market again by 16.1 percentage points. Unfortunately ODC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ODC investors were disappointed as the stock returned 0% since the end of the third quarter (through 11/27) 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 most of these stocks already outperformed the market so far in 2020.
Follow Oil-Dri Corp Of America (NYSE:ODC)
Follow Oil-Dri Corp Of America (NYSE:ODC)
Disclosure: None. This article was originally published at Insider Monkey.
