How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding OHA Investment Corp (NASDAQ:OHAI).
Is OHA Investment Corp (NASDAQ:OHAI) the right investment to pursue these days? The smart money is in a neutral mood. The number of long hedge fund positions stayed the same which is a slightly negative development in our experience. OHA Investment Corp (NASDAQ:OHAI) was in 4 hedge funds’ portfolios at the end of September. At the end of this article, we will also compare OHA Investment Corp (NASDAQ:OHAI) to other stocks including Pixelworks, Inc. (NASDAQ:PXLW), Dover Motorsports, Inc. (NYSE:DVD), and Universal Technical Institute, Inc. (NYSE:UTI) to get a better sense of its popularity.
Follow Oha Investment Corp (NASDAQ:OHAI)
Follow Oha Investment Corp (NASDAQ:OHAI)
In the 21st century investor’s toolkit, there are a lot of tools that stock market investors use to evaluate stocks. A pair of the less utilized tools are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the elite investment managers can outpace the market by a healthy margin (see the details here).
With all of this in mind, we’re going to take a look at the recent action regarding OHA Investment Corp (NASDAQ:OHAI).
How are hedge funds trading OHA Investment Corp (NASDAQ:OHAI)?
At the end of Q3, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, flat over the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Derek C. Schrier’s Indaba Capital Management has the most valuable position in OHA Investment Corp (NASDAQ:OHAI), worth close to $2.6 million, corresponding to 0.8% of its total 13F portfolio. The second most bullish fund manager is Chuck Royce of Royce & Associates, with a $1 million position; less than 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish contain John Overdeck and David Siegel’s Two Sigma Advisors, Mark Coe’s Coe Capital Management.
We view hedge fund selling in the stock unfavorable, but in this case, there was only a single hedge fund selling its entire position: Millennium Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in here because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Coe Capital Management).
Let’s go over hedge fund activity in other stocks similar to OHA Investment Corp (NASDAQ:OHAI). These stocks are Pixelworks, Inc. (NASDAQ:PXLW), Dover Motorsports, Inc. (NYSE:DVD), Universal Technical Institute, Inc. (NYSE:UTI), and L.S. Starrett Company (NYSE:SCX). This group of stocks’ market valuations matches OHA Investment Corp (NASDAQ:OHAI)’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PXLW | 9 | 7322 | -4 |
| DVD | 5 | 15161 | -1 |
| UTI | 11 | 21128 | -1 |
| SCX | 4 | 12369 | 0 |
As you can see, these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $14 million. That figure was $4 million in OHA Investment Corp (NASDAQ:OHAI)’s case. Universal Technical Institute, Inc. (NYSE:UTI) is the most popular stock in this table. On the other hand, L.S. Starrett Company (NYSE:SCX) is the least popular one, with only 4 bullish hedge fund positions. Compared to these stocks, OHA Investment Corp (NASDAQ:OHAI) is even less popular than L.S. Starrett Company (NYSE:SCX). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.
