Is Olympic Steel, Inc. (ZEUS) A Good Stock to Buy?

The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Olympic Steel, Inc. (NASDAQ:ZEUS) from the perspective of those successful funds.

Is Olympic Steel, Inc. (NASDAQ:ZEUS) a superb investment right now? The smart money is really becoming less confident. The number of long hedge fund bets dropped by 1 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Patriot National Inc (NYSE:PN), JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO), and LSB Industries, Inc. (NYSE:LXU) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Hedge fund activity in Olympic Steel, Inc. (NASDAQ:ZEUS)

Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 10% drop from the second quarter of 2016. On the other hand, there were a total of 6 hedge funds with a bullish position in ZEUS at the beginning of this year, which has climbed by 50% in 2016. So, let’s review 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, Cliff Asness’ AQR Capital Management has the largest position in Olympic Steel, Inc. (NASDAQ:ZEUS), worth close to $8.2 million. On AQR Capital Management’s heels is Renaissance Technologies, one of the largest hedge funds in the world, holding a $3.5 million position. Remaining professional money managers that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Chuck Royce’s Royce & Associates, and Peter Muller’s PDT Partners. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.

We already know that not all hedge funds are bullish on the stock and some hedge funds actually dropped their positions entirely. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dropped the biggest investment of the “upper crust” of funds watched by Insider Monkey, comprising about $1.6 million in stock, and Joshua Packwood and Schuster Tanger’s Radix Partners was right behind this move, as the fund said goodbye to about $0.4 million worth of shares.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Olympic Steel, Inc. (NASDAQ:ZEUS) but similarly valued. We will take a look at Patriot National Inc (NYSE:PN), JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO), LSB Industries, Inc. (NYSE:LXU), and Star Bulk Carriers Corp. (NASDAQ:SBLK). All of these stocks’ market caps resemble ZEUS’s market cap.

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 $54 million. That figure was $15 million in ZEUS’s case. Patriot National Inc (NYSE:PN) is the most popular stock in this table. On the other hand JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Olympic Steel, Inc. (NASDAQ:ZEUS) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None