It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. The Standard and Poor’s 500 Index returned 7.6% over the 12-month period ending November 21, while more than 51% of the constituents of the index underperformed the benchmark. Hence, a random stock picking process will most likely lead to disappointment. At the same time, the 30 most favored mid-cap stocks by the best performing hedge funds monitored by Insider Monkey generated a return of 18% over the same time span. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That’s why we are going to go over recent hedge fund activity in Otter Tail Corporation (NASDAQ:OTTR) .
Otter Tail Corporation (NASDAQ:OTTR) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. OTTR was in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 11 hedge funds in our database with OTTR holdings at the end of the previous quarter. 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 CSG Systems International, Inc. (NASDAQ:CSGS), TherapeuticsMD Inc (OTC:TXMD), and Quad/Graphics, Inc. (NYSE:QUAD) to gather more data points.
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We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
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With all of this in mind, we’re going to analyze the new action surrounding Otter Tail Corporation (NASDAQ:OTTR).
How are hedge funds trading Otter Tail Corporation (NASDAQ:OTTR)?
Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the second quarter of 2016. On the other hand, there were a total of 8 hedge funds with a bullish position in OTTR at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, led by Mario Gabelli, holds the most valuable position in Otter Tail Corporation (NASDAQ:OTTR). GAMCO Investors has a $13.8 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, one of the largest hedge funds in the world, which holds a $10 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism consist of Cliff Asness’ AQR Capital Management, Roger Ibbotson’s Zebra Capital Management and Ken Griffin’s Citadel Investment Group. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.
Due to the fact that Otter Tail Corporation (NASDAQ:OTTR) has experienced falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedge funds that decided to sell off their positions entirely by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management sold off the biggest stake of the “upper crust” of funds followed by Insider Monkey, totaling about $1.3 million in stock. John Overdeck and David Siegel’s fund, Two Sigma Advisors, also dumped its stock, about $0.2 million worth.
Let’s now review hedge fund activity in other stocks similar to Otter Tail Corporation (NASDAQ:OTTR). We will take a look at CSG Systems International, Inc. (NASDAQ:CSGS), TherapeuticsMD Inc (OTC:TXMD), Quad/Graphics, Inc. (NYSE:QUAD), and Fossil Inc (NASDAQ:FOSL). This group of stocks’ market caps are similar to OTTR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSGS | 16 | 157761 | -3 |
| TXMD | 13 | 56897 | 4 |
| QUAD | 21 | 107638 | 3 |
| FOSL | 15 | 119436 | -5 |
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $32 million in OTTR’s case. Quad/Graphics, Inc. (NYSE:QUAD) is the most popular stock in this table. On the other hand TherapeuticsMD Inc (OTC:TXMD) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Otter Tail Corporation (NASDAQ:OTTR) is even less popular than TXMD. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None
