Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we pay special attention to the hedge fund activity in the small-cap space.
Overstock.com, Inc. (NASDAQ:OSTK) was in 13 hedge funds’ portfolios at the end of March. OSTK shareholders have witnessed an increase in hedge fund sentiment of late. There were 10 hedge funds in our database with OSTK positions at the end of the previous quarter. Our calculations also showed that OSTK isn’t among the 30 most popular stocks among hedge funds.
In today’s marketplace there are dozens of tools stock traders use to appraise stocks. Two of the most useful tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the top hedge fund managers can trounce the broader indices by a superb amount (see the details here).
We’re going to take a look at the latest hedge fund action regarding Overstock.com, Inc. (NASDAQ:OSTK).
What does smart money think about Overstock.com, Inc. (NASDAQ:OSTK)?
At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in OSTK a year ago. So, let’s see 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, North Fourth Asset Management, managed by Anthony Joseph Vaccarino, holds the biggest position in Overstock.com, Inc. (NASDAQ:OSTK). North Fourth Asset Management has a $14.6 million call position in the stock, comprising 3.2% of its 13F portfolio. On North Fourth Asset Management’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $6 million call position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish contain Anthony Joseph Vaccarino’s North Fourth Asset Management, and Claes Fornell’s CSat Investment Advisory.
As aggregate interest increased, key hedge funds have been driving this bullishness. OZ Management, managed by Daniel S. Och, initiated the biggest call position in Overstock.com, Inc. (NASDAQ:OSTK). OZ Management had $0.8 million invested in the company at the end of the quarter. Warren Lammert’s Granite Point Capital also initiated a $0.5 million position during the quarter. The following funds were also among the new OSTK investors: Philip Hempleman’s Ardsley Partners, Adam Usdan’s Trellus Management Company, and Paul Tudor Jones’s Tudor Investment Corp.
Let’s now review hedge fund activity in other stocks similar to Overstock.com, Inc. (NASDAQ:OSTK). We will take a look at Caesarstone Ltd. (NASDAQ:CSTE), Tredegar Corporation (NYSE:TG), Fortuna Silver Mines Inc. (NYSE:FSM), and Lands’ End, Inc. (NASDAQ:LE). All of these stocks’ market caps match OSTK’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CSTE | 6 | 20632 | 0 |
| TG | 12 | 67801 | 1 |
| FSM | 13 | 42285 | -2 |
| LE | 14 | 107631 | 1 |
| Average | 11.25 | 59587 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $20 million in OSTK’s case. Lands’ End, Inc. (NASDAQ:LE) is the most popular stock in this table. On the other hand Caesarstone Ltd. (NASDAQ:CSTE) is the least popular one with only 6 bullish hedge fund positions. Overstock.com, Inc. (NASDAQ:OSTK) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately OSTK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OSTK were disappointed as the stock returned -37.8% during the same period 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 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
