Is OSG A Good Stock To Buy Now?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Overseas Shipholding Group, Inc. (NYSE:OSG) based on that data.

Is OSG a good stock to buy now? The smart money was getting less bullish. The number of long hedge fund bets were trimmed by 1 in recent months. Overseas Shipholding Group, Inc. (NYSE:OSG) was in 11 hedge funds’ portfolios at the end of September. The all time high for this statistics is 20. Our calculations also showed that OSG isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 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 66 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

John Paulson of Paulson & Co

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Keeping this in mind we’re going to take a gander at the key hedge fund action encompassing Overseas Shipholding Group, Inc. (NYSE:OSG).

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

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in OSG a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Cyrus Capital Partners held the most valuable stake in Overseas Shipholding Group, Inc. (NYSE:OSG), which was worth $19.1 million at the end of the third quarter. On the second spot was Paulson & Co which amassed $13.5 million worth of shares. Renaissance Technologies, D E Shaw, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cyrus Capital Partners allocated the biggest weight to Overseas Shipholding Group, Inc. (NYSE:OSG), around 4.45% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, designating 0.42 percent of its 13F equity portfolio to OSG.

Judging by the fact that Overseas Shipholding Group, Inc. (NYSE:OSG) has faced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds that elected to cut their entire stakes in the third quarter. At the top of the heap, Israel Englander’s Millennium Management dumped the largest position of the “upper crust” of funds followed by Insider Monkey, worth about $0.1 million in stock. Ken Griffin’s fund, Citadel Investment Group, also dumped its stock, about $0.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let’s check out hedge fund activity in other stocks similar to Overseas Shipholding Group, Inc. (NYSE:OSG). We will take a look at Flexsteel Industries, Inc. (NASDAQ:FLXS), Luna Innovations Incorporated (NASDAQ:LUNA), VOXX International Corp (NASDAQ:VOXX), Ocwen Financial Corporation (NYSE:OCN), Quantum Corporation (NASDAQ:QMCO), Sify Technologies Limited (NASDAQ:SIFY), and LiqTech International Inc (NYSE:LIQT). This group of stocks’ market values match OSG’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.6 hedge funds with bullish positions and the average amount invested in these stocks was $22 million. That figure was $39 million in OSG’s case. Luna Innovations Incorporated (NASDAQ:LUNA) is the most popular stock in this table. On the other hand Sify Technologies Limited (NASDAQ:SIFY) is the least popular one with only 2 bullish hedge fund positions. Overseas Shipholding Group, Inc. (NYSE:OSG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OSG is 70.5. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately OSG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OSG were disappointed as the stock returned 1.4% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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