Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about ONE Gas Inc (NYSE:OGS) in this article.
Is ONE Gas Inc (NYSE:OGS) a safe investment today? The best stock pickers are becoming less hopeful. The number of bullish hedge fund bets were trimmed by 2 lately. Our calculations also showed that OGS isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to analyze the new hedge fund action surrounding ONE Gas Inc (NYSE:OGS).
What have hedge funds been doing with ONE Gas Inc (NYSE:OGS)?
At the end of the first quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OGS over the last 15 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, GLG Partners held the most valuable stake in ONE Gas Inc (NYSE:OGS), which was worth $27.7 million at the end of the first quarter. On the second spot was Winton Capital Management which amassed $21.1 million worth of shares. Moreover, Impax Asset Management, AQR Capital Management, and Arrowstreet Capital were also bullish on ONE Gas Inc (NYSE:OGS), allocating a large percentage of their portfolios to this stock.
Due to the fact that ONE Gas Inc (NYSE:OGS) has witnessed falling interest from the smart money, we can see that there were a few money managers who sold off their full holdings by the end of the third quarter. At the top of the heap, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $1.4 million in call options. Ken Griffin’s fund, Citadel Investment Group, also dropped its call options, about $0.8 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 2 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ONE Gas Inc (NYSE:OGS) but similarly valued. We will take a look at Cinemark Holdings, Inc. (NYSE:CNK), Webster Financial Corporation (NYSE:WBS), Cameco Corporation (NYSE:CCJ), and Eaton Vance Corp (NYSE:EV). 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 |
|---|---|---|---|
| CNK | 20 | 226209 | 3 |
| WBS | 25 | 303490 | -1 |
| CCJ | 24 | 351465 | 0 |
| EV | 13 | 115183 | -4 |
| Average | 20.5 | 249087 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $101 million in OGS’s case. Webster Financial Corporation (NYSE:WBS) is the most popular stock in this table. On the other hand Eaton Vance Corp (NYSE:EV) is the least popular one with only 13 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately OGS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); OGS investors were disappointed as the stock returned 3.1% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
