We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 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 Office Properties Income Trust (NASDAQ:OPI) in this article.
Office Properties Income Trust (NASDAQ:OPI) has seen a decrease in enthusiasm from smart money lately. Our calculations also showed that OPI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 S&P 500 ETFs by more than 41 percentage points since March 2017 (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 stocks that are in our short portfolio.
Joe Huber of Huber Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the new hedge fund action regarding Office Properties Income Trust (NASDAQ:OPI).
Hedge fund activity in Office Properties Income Trust (NASDAQ:OPI)
At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the third quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in OPI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the most valuable position in Office Properties Income Trust (NASDAQ:OPI), worth close to $6.7 million, amounting to less than 0.1%% of its total 13F portfolio. Coming in second is Huber Capital Management, led by Joe Huber, holding a $2.4 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other peers with similar optimism include James Morrow’s Callodine Capital Management, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Callodine Capital Management allocated the biggest weight to Office Properties Income Trust (NASDAQ:OPI), around 0.96% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, dishing out 0.32 percent of its 13F equity portfolio to OPI.
Because Office Properties Income Trust (NASDAQ:OPI) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few fund managers that decided to sell off their full holdings in the third quarter. Intriguingly, Mike Vranos’s Ellington cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth an estimated $0.3 million in stock, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors was right behind this move, as the fund dumped about $0.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 1 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Office Properties Income Trust (NASDAQ:OPI). These stocks are Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), Goosehead Insurance, Inc. (NASDAQ:GSHD), Rambus Inc. (NASDAQ:RMBS), and Sykes Enterprises, Incorporated (NASDAQ:SYKE). This group of stocks’ market caps resemble OPI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CCO | 42 | 369556 | -2 |
| GSHD | 9 | 53749 | -1 |
| RMBS | 19 | 173795 | -5 |
| SYKE | 18 | 98479 | 4 |
| Average | 22 | 173895 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $174 million. That figure was $16 million in OPI’s case. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is the most popular stock in this table. On the other hand Goosehead Insurance, Inc. (NASDAQ:GSHD) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Office Properties Income Trust (NASDAQ:OPI) is even less popular than GSHD. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but managed to beat the market by 4.2 percentage points. A small number of hedge funds were also right about betting on OPI, though not to the same extent, as the stock returned -16.4% during the same time period and outperformed the market as well.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.