“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Otter Tail Corporation (NASDAQ:OTTR) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is Otter Tail Corporation (NASDAQ:OTTR) a bargain? Money managers are buying. The number of long hedge fund positions inched up by 2 lately. Our calculations also showed that OTTR isn’t among the 30 most popular stocks among hedge funds (view the video below). OTTR was in 12 hedge funds’ portfolios at the end of June. There were 10 hedge funds in our database with OTTR holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are a multitude of tools shareholders employ to size up stocks. Two of the less known tools are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the best fund managers can outperform the S&P 500 by a solid amount (see the details here).
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. We’re going to take a peek at the new hedge fund action surrounding Otter Tail Corporation (NASDAQ:OTTR).
What does smart money think about Otter Tail Corporation (NASDAQ:OTTR)?
At Q2’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in OTTR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Otter Tail Corporation (NASDAQ:OTTR) was held by Renaissance Technologies, which reported holding $49.1 million worth of stock at the end of March. It was followed by GAMCO Investors with a $18.3 million position. Other investors bullish on the company included Millennium Management, Citadel Investment Group, and GLG Partners.
As one would reasonably expect, specific money managers have been driving this bullishness. GLG Partners, managed by Noam Gottesman, created the largest position in Otter Tail Corporation (NASDAQ:OTTR). GLG Partners had $1.5 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.3 million investment in the stock during the quarter. The other funds with brand new OTTR positions are Ronald Hua’s Qtron Investments and Steve Cohen’s Point72 Asset Management.
Let’s now review hedge fund activity in other stocks similar to Otter Tail Corporation (NASDAQ:OTTR). These stocks are Summit Materials Inc (NYSE:SUM), Urban Edge Properties (NYSE:UE), National Beverage Corp. (NASDAQ:FIZZ), and Renasant Corporation (NASDAQ:RNST). This group of stocks’ market valuations match OTTR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SUM | 22 | 557034 | 0 |
| UE | 12 | 121836 | -2 |
| FIZZ | 22 | 261569 | 1 |
| RNST | 11 | 30890 | -5 |
| Average | 16.75 | 242832 | -1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $77 million in OTTR’s case. Summit Materials Inc (NYSE:SUM) is the most popular stock in this table. On the other hand Renasant Corporation (NASDAQ:RNST) is the least popular one with only 11 bullish hedge fund positions. Otter Tail Corporation (NASDAQ:OTTR) 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 OTTR, though not to the same extent, as the stock returned 2.5% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
