The fourth quarter was a rough one for most investors, as fears of a rising interest rate environment in the U.S, a trade war with China, and a more or less stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Olin Corporation (NYSE:OLN), and what that likely means for the prospects of the company and its stock.
Olin Corporation (NYSE:OLN) investors should be aware of an increase in support from the world’s most elite money managers of late. OLN was in 33 hedge funds’ portfolios at the end of December. There were 27 hedge funds in our database with OLN holdings at the end of the previous quarter. Our calculations also showed that oln isn’t among the 30 most popular stocks among hedge funds.
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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 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.
Michael Lowenstein of Kensico Capital
We’re going to take a peek at the latest hedge fund action regarding Olin Corporation (NYSE:OLN).
What does the smart money think about Olin Corporation (NYSE:OLN)?
At the end of the fourth quarter, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards OLN over the last 14 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of Olin Corporation (NYSE:OLN), with a stake worth $201.6 million reported as of the end of September. Trailing Adage Capital Management was Kensico Capital, which amassed a stake valued at $166.7 million. D E Shaw, Millennium Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key money managers were breaking ground themselves. BeaconLight Capital, managed by Ed Bosek, created the largest position in Olin Corporation (NYSE:OLN). BeaconLight Capital had $18.8 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $12 million position during the quarter. The other funds with brand new OLN positions are Chuck Royce’s Royce & Associates, George Baxter’s Sabrepoint Capital, and Jonathan Barrett and Paul Segal’s Luminus Management.
Let’s now take a look at hedge fund activity in other stocks similar to Olin Corporation (NYSE:OLN). These stocks are Essent Group Ltd (NYSE:ESNT), Air Lease Corp (NYSE:AL), Glacier Bancorp, Inc. (NASDAQ:GBCI), and National Beverage Corp. (NASDAQ:FIZZ). This group of stocks’ market valuations resemble OLN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ESNT | 28 | 369859 | -2 |
| AL | 33 | 321349 | 6 |
| GBCI | 10 | 41800 | 3 |
| FIZZ | 21 | 265029 | 6 |
| Average | 23 | 249509 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $250 million. That figure was $638 million in OLN’s case. Air Lease Corp (NYSE:AL) is the most popular stock in this table. On the other hand Glacier Bancorp, Inc. (NASDAQ:GBCI) is the least popular one with only 10 bullish hedge fund positions. Olin Corporation (NYSE:OLN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on OLN, though not to the same extent, as the stock returned 19.9% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
