We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) and determine whether hedge funds skillfully traded this stock.
Is Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) the right pick for your portfolio? The smart money was in a bullish mood. The number of bullish hedge fund bets went up by 5 recently. Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) was in 24 hedge funds’ portfolios at the end of June. The all time high for this statistics is 31. Our calculations also showed that OLLI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Louis Bacon Moore of Moore Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s check out the recent hedge fund action regarding Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI).
How have hedgies been trading Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI)?
At the end of June, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from one quarter earlier. By comparison, 31 hedge funds held shares or bullish call options in OLLI a year ago. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Akre Capital Management, managed by Charles Akre, holds the biggest position in Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI). Akre Capital Management has a $48.8 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Ken Griffin of Citadel Investment Group, with a $29.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers with similar optimism encompass Israel Englander’s Millennium Management, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Shellback Capital allocated the biggest weight to Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), around 2.44% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, dishing out 1.05 percent of its 13F equity portfolio to OLLI.
Consequently, key hedge funds have jumped into Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) headfirst. Moore Global Investments, managed by Louis Bacon, initiated the most outsized position in Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI). Moore Global Investments had $7.5 million invested in the company at the end of the quarter. Richard Driehaus’s Driehaus Capital also made a $5.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Noam Gottesman’s GLG Partners, Donald Sussman’s Paloma Partners, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s check out hedge fund activity in other stocks similar to Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI). We will take a look at United Microelectronics Corp (NYSE:UMC), Cree, Inc. (NASDAQ:CREE), Continental Resources, Inc. (NYSE:CLR), Pan American Silver Corp. (NASDAQ:PAAS), Williams-Sonoma, Inc. (NYSE:WSM), Proofpoint Inc (NASDAQ:PFPT), and Gentex Corporation (NASDAQ:GNTX). All of these stocks’ market caps are closest to OLLI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| UMC | 11 | 110335 | -4 |
| CREE | 17 | 597780 | 1 |
| CLR | 23 | 153030 | -3 |
| PAAS | 28 | 590941 | -2 |
| WSM | 27 | 457653 | 1 |
| PFPT | 35 | 488381 | 8 |
| GNTX | 38 | 555022 | 1 |
| Average | 25.6 | 421877 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.6 hedge funds with bullish positions and the average amount invested in these stocks was $422 million. That figure was $179 million in OLLI’s case. Gentex Corporation (NASDAQ:GNTX) is the most popular stock in this table. On the other hand United Microelectronics Corp (NYSE:UMC) is the least popular one with only 11 bullish hedge fund positions. Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OLLI is 57.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and surpassed the market by 17.7 percentage points. Unfortunately OLLI wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); OLLI investors were disappointed as the stock returned -10.4% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Follow Ollie's Bargain Outlet Holdings Inc. (NASDAQ:OLLI)
Follow Ollie's Bargain Outlet Holdings Inc. (NASDAQ:OLLI)
Disclosure: None. This article was originally published at Insider Monkey.
