We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Owens-Illinois Inc (NYSE:OI).
Is Owens-Illinois Inc (NYSE:OI) a buy here? The smart money is taking a bullish view. The number of bullish hedge fund positions advanced by 1 lately. Our calculations also showed that OI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Alexander Roepers of Atlantic Investment Management
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the key hedge fund action regarding Owens-Illinois Inc (NYSE:OI).
What have hedge funds been doing with Owens-Illinois Inc (NYSE:OI)?
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards OI over the last 17 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, First Pacific Advisors held the most valuable stake in Owens-Illinois Inc (NYSE:OI), which was worth $103.7 million at the end of the third quarter. On the second spot was Atlantic Investment Management which amassed $74.4 million worth of shares. Millennium Management, Lyrical Asset Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to Owens-Illinois Inc (NYSE:OI), around 26.12% of its 13F portfolio. Spitfire Capital is also relatively very bullish on the stock, designating 6.18 percent of its 13F equity portfolio to OI.
As one would reasonably expect, key money managers were breaking ground themselves. Lonestar Capital Management, managed by Jerome L. Simon, assembled the largest position in Owens-Illinois Inc (NYSE:OI). Lonestar Capital Management had $9.2 million invested in the company at the end of the quarter. Jerome L. Simon’s Lonestar Capital Management also made a $2.6 million investment in the stock during the quarter. The other funds with brand new OI positions are Matthew Hulsizer’s PEAK6 Capital Management, David Harding’s Winton Capital Management, and Ray Dalio’s Bridgewater Associates.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Owens-Illinois Inc (NYSE:OI) but similarly valued. We will take a look at Brinker International, Inc. (NYSE:EAT), ICF International Inc (NASDAQ:ICFI), MaxLinear, Inc. (NYSE:MXL), and CNOOC Limited (NYSE:CEO). This group of stocks’ market values are closest to OI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EAT | 26 | 231758 | -2 |
| ICFI | 10 | 31687 | -5 |
| MXL | 12 | 23578 | 5 |
| CEO | 15 | 206809 | 6 |
| Average | 15.75 | 123458 | 1 |
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 $123 million. That figure was $356 million in OI’s case. Brinker International, Inc. (NYSE:EAT) is the most popular stock in this table. On the other hand ICF International Inc (NASDAQ:ICFI) is the least popular one with only 10 bullish hedge fund positions. Owens-Illinois Inc (NYSE:OI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately OI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OI were disappointed as the stock returned -3.3% during the fourth quarter (through the end of November) 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 many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
