Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze ONE Gas Inc (NYSE:OGS) from the perspective of those elite funds.
ONE Gas Inc (NYSE:OGS) was in 14 hedge funds’ portfolios at the end of the second quarter of 2019. OGS shareholders have witnessed a decrease in hedge fund interest recently. There were 15 hedge funds in our database with OGS positions at the end of the previous quarter. Our calculations also showed that OGS isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s review the new hedge fund action regarding ONE Gas Inc (NYSE:OGS).
What does smart money think about ONE Gas Inc (NYSE:OGS)?
At Q2’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards OGS over the last 16 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, GLG Partners was the largest shareholder of ONE Gas Inc (NYSE:OGS), with a stake worth $26.5 million reported as of the end of March. Trailing GLG Partners was Winton Capital Management, which amassed a stake valued at $23.3 million. Millennium Management, Impax Asset Management, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that ONE Gas Inc (NYSE:OGS) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds who were dropping their positions entirely by the end of the second quarter. At the top of the heap, Renaissance Technologies dumped the biggest investment of all the hedgies watched by Insider Monkey, comprising an estimated $0.5 million in stock, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital was right behind this move, as the fund dropped about $0.3 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds by the end of the second quarter.
Let’s check out hedge fund activity in other stocks similar to ONE Gas Inc (NYSE:OGS). We will take a look at Black Hills Corporation (NYSE:BKH), Kinross Gold Corporation (NYSE:KGC), VEON Ltd. (NASDAQ:VEON), and Hawaiian Electric Industries, Inc. (NYSE:HE). This group of stocks’ market valuations resemble OGS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BKH | 16 | 155183 | -2 |
| KGC | 18 | 311730 | -1 |
| VEON | 12 | 72439 | -3 |
| HE | 17 | 146762 | 5 |
| Average | 15.75 | 171529 | -0.25 |
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 $172 million. That figure was $94 million in OGS’s case. Kinross Gold Corporation (NYSE:KGC) is the most popular stock in this table. On the other hand VEON Ltd. (NASDAQ:VEON) is the least popular one with only 12 bullish hedge fund positions. ONE Gas Inc (NYSE:OGS) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on OGS as the stock returned 7% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
