Is OPEN Stock A Buy or Sell?

In this article you are going to find out whether hedge funds think Opendoor Technologies Inc. (NASDAQ:OPEN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is OPEN stock a buy? Money managers were taking an optimistic view. Opendoor Technologies Inc. (NASDAQ:OPEN) was in 28 hedge funds’ portfolios at the end of December. Our calculations also showed that OPEN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Brad Gerstner of Altimeter Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. Now we’re going to go over the recent hedge fund action regarding Opendoor Technologies Inc. (NASDAQ:OPEN).

Do Hedge Funds Think OPEN Is A Good Stock To Buy Now?

At Q4’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 28 from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in OPEN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Opendoor Technologies Inc. (NASDAQ:OPEN) was held by Magnetar Capital, which reported holding $445.3 million worth of stock at the end of December. It was followed by Suvretta Capital Management with a $172.6 million position. Other investors bullish on the company included ARK Investment Management, Altimeter Capital Management, and Millennium Management. In terms of the portfolio weights assigned to each position Magnetar Capital allocated the biggest weight to Opendoor Technologies Inc. (NASDAQ:OPEN), around 6.29% of its 13F portfolio. Hidden Lake Asset Management is also relatively very bullish on the stock, setting aside 3.21 percent of its 13F equity portfolio to OPEN.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Opendoor Technologies Inc. (NASDAQ:OPEN) headfirst. Magnetar Capital, managed by Alec Litowitz and Ross Laser, created the biggest position in Opendoor Technologies Inc. (NASDAQ:OPEN). Magnetar Capital had $445.3 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also initiated a $172.6 million position during the quarter. The other funds with brand new OPEN positions are Catherine D. Wood’s ARK Investment Management, Brad Gerstner’s Altimeter Capital Management, and Israel Englander’s Millennium Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Opendoor Technologies Inc. (NASDAQ:OPEN) but similarly valued. These stocks are Jack Henry & Associates, Inc. (NASDAQ:JKHY), GSX Techedu Inc. (NYSE:GSX), NortonLifeLock Inc. (NASDAQ:NLOK), Bio-Techne Corporation (NASDAQ:TECH), Dynatrace, Inc. (NYSE:DT), The Boston Beer Company Inc (NYSE:SAM), and Wynn Resorts, Limited (NASDAQ:WYNN). All of these stocks’ market caps resemble OPEN’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $889 million. That figure was $1025 million in OPEN’s case. Dynatrace, Inc. (NYSE:DT) is the most popular stock in this table. On the other hand GSX Techedu Inc. (NYSE:GSX) is the least popular one with only 17 bullish hedge fund positions. Opendoor Technologies Inc. (NASDAQ:OPEN) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OPEN is 34.4. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and surpassed the market again by 0.9 percentage points. Unfortunately OPEN wasn’t nearly as popular as these 30 stocks (hedge fund sentiment was quite bearish); OPEN investors were disappointed as the stock returned -23.4% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.