Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like OneMain Holdings Inc (NYSE:OMF).
OneMain Holdings Inc (NYSE:OMF) has experienced a decrease in enthusiasm from smart money lately. OMF was in 19 hedge funds’ portfolios at the end of the third quarter of 2016. There were 20 hedge funds in our database with OMF holdings at the end of the previous quarter. At the end of this article we will also compare OMF to other stocks including Yanzhou Coal Mining Co Ltd (ADR) (NYSE:YZC), Gerdau SA (ADR) (NYSE:GGB), and Valmont Industries, Inc. (NYSE:VMI) to get a better sense of its popularity.
Follow Onemain Holdings Inc. (NYSE:OMF)
Follow Onemain Holdings Inc. (NYSE:OMF)
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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How have hedgies been trading OneMain Holdings Inc (NYSE:OMF)?
At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 5% from the second quarter of 2016, and the fourth-straight quarter in which fewer hedge funds owned the stock. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Omega Advisors, managed by Leon Cooperman, holds the biggest position in OneMain Holdings Inc (NYSE:OMF). Omega Advisors has a $96.3 million position in the stock, comprising 3% of its 13F portfolio. On Omega Advisors’ heels is Martin Hughes of Toscafund Asset Management, with a $56.3 million position; 41.8% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism encompass Michael Barnes and Arif Inayatullah’s Tricadia Capital Management, Alex Lieblong’s Key Colony Management and Matthew Lindenbaum’s Basswood Capital.
Seeing as OneMain Holdings Inc (NYSE:OMF) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there were a few fund managers who were dropping their entire stakes heading into Q4. At the top of the heap, James Dinan’s York Capital Management sold off the largest position of all the hedgies watched by Insider Monkey, totaling about $8.6 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund sold off about $7 million worth of shares. These transactions are important to note, as aggregate hedge fund interest was cut by 1 fund heading into Q4.
Let’s now review hedge fund activity in other stocks similar to OneMain Holdings Inc (NYSE:OMF). We will take a look at Yanzhou Coal Mining Co Ltd (ADR) (NYSE:YZC), Gerdau SA (ADR) (NYSE:GGB), Valmont Industries, Inc. (NYSE:VMI), and Avis Budget Group Inc. (NASDAQ:CAR). This group of stocks’ market valuations are closest to OMF’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| YZC | 2 | 3494 | -1 |
| GGB | 11 | 118035 | -2 |
| VMI | 21 | 341199 | -2 |
| CAR | 30 | 1080116 | -3 |
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $386 million. That figure was $308 million in OMF’s case. Avis Budget Group Inc. (NASDAQ:CAR) is the most popular stock in this table. On the other hand Yanzhou Coal Mining Co Ltd (ADR) (NYSE:YZC) is the least popular one with only 2 bullish hedge fund positions. OneMain Holdings Inc (NYSE:OMF) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CAR might be a better candidate to consider a long position in.
Disclosure: None
