Is OGE Energy Corp. (OGE) A Good Stock To Buy?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze OGE Energy Corp. (NYSE:OGE) from the perspective of those successful funds.

Is OGE Energy Corp. (NYSE:OGE) ready to rally soon? The smart money is really becoming less confident. The number of long hedge fund investments fell by 3 lately. OGE was in 13 hedge funds’ portfolios at the end of September. There were 16 hedge funds in our database with OGE holdings at the end of the previous quarter. At the end of this article we will also compare OGE to other stocks including TransUnion (NYSE:TRU), STERIS Corp (NYSE:STE), and Black Knight Financial Services Inc (NYSE:BKFS) to get a better sense of its popularity.

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Hedge fund activity in OGE Energy Corp. (NYSE:OGE)

Heading into the fourth quarter of 2016, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 19% fall from the second quarter of 2016. Below, you can check out the change in hedge fund sentiment towards OGE over the last 5 quarters, which shows a steep decline in sentiment over the past year. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Adage Capital Management, led by Phill Gross and Robert Atchinson, holds the largest position in OGE Energy Corp. (NYSE:OGE). Adage Capital Management has a $76.5 million position in the stock. The second largest stake is held by Luminus Management, led by Jonathan Barrett and Paul Segal, holding a $60.1 million position; the fund has 1.5% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Dmitry Balyasny’s Balyasny Asset Management, Jim Simons’ Renaissance Technologies, and Cliff Asness’ AQR Capital Management. We should note that Luminus Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that cut their entire stakes in the stock during the third quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP cut the largest position of all the hedgies watched by Insider Monkey, comprising an estimated $3 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also dropped its stock, about $1.7 million worth.

Let’s now review hedge fund activity in other stocks similar to OGE Energy Corp. (NYSE:OGE). These stocks are TransUnion (NYSE:TRU), STERIS Corp (NYSE:STE), Black Knight Financial Services Inc (NYSE:BKFS), and Flowserve Corporation (NYSE:FLS). This group of stocks’ market values are similar to OGE’s market value.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $395 million. That figure was $199 million in OGE’s case. TransUnion (NYSE:TRU) is the most popular stock in this table. On the other hand Black Knight Financial Services Inc (NYSE:BKFS) is the least popular one with only 9 bullish hedge fund positions. OGE Energy Corp. (NYSE:OGE) 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. In this regard TRU might be a better candidate to consider taking a long position in.

Disclosure: None