Is The ODP Corporation (ODP) A Good Stock To Buy?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is The ODP Corporation (NASDAQ:ODP), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Is The ODP Corporation (NASDAQ:ODP) a good stock to buy? Investors who are in the know were in a bearish mood. The number of long hedge fund bets shrunk by 1 recently. The ODP Corporation (NASDAQ:ODP) was in 23 hedge funds’ portfolios at the end of June. The all time high for this statistic is 58. Our calculations also showed that ODP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 24 hedge funds in our database with ODP positions at the end of the first quarter.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Joshua Friedman of Canyon Capital Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to view the fresh hedge fund action surrounding The ODP Corporation (NASDAQ:ODP).

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

At Q2’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. By comparison, 18 hedge funds held shares or bullish call options in ODP a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

The largest stake in The ODP Corporation (NASDAQ:ODP) was held by HG Vora Capital Management, which reported holding $240.1 million worth of stock at the end of June. It was followed by Canyon Capital Advisors with a $59.7 million position. Other investors bullish on the company included Greenlight Capital, Arrowstreet Capital, and Cannell Capital. In terms of the portfolio weights assigned to each position HG Vora Capital Management allocated the biggest weight to The ODP Corporation (NASDAQ:ODP), around 10.83% of its 13F portfolio. Alta Fundamental Advisers is also relatively very bullish on the stock, dishing out 8.73 percent of its 13F equity portfolio to ODP.

Since The ODP Corporation (NASDAQ:ODP) has experienced declining sentiment from the smart money, it’s safe to say that there were a few hedge funds that slashed their full holdings last quarter. Intriguingly, Kamyar Khajavi’s MIK Capital said goodbye to the largest stake of all the hedgies followed by Insider Monkey, worth an estimated $4.7 million in stock. Parvinder Thiara’s fund, Athanor Capital, also dropped its stock, about $4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 1 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to The ODP Corporation (NASDAQ:ODP). These stocks are The St. Joe Company (NYSE:JOE), Cinemark Holdings, Inc. (NYSE:CNK), iRobot Corporation (NASDAQ:IRBT), Plexus Corp. (NASDAQ:PLXS), Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), MYT Netherlands Parent B.V. (NYSE:MYTE), and Cadence Bancorporation (NYSE:CADE). This group of stocks’ market caps resemble ODP’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $326 million. That figure was $463 million in ODP’s case. Cinemark Holdings, Inc. (NYSE:CNK) is the most popular stock in this table. On the other hand The St. Joe Company (NYSE:JOE) is the least popular one with only 15 bullish hedge fund positions. The ODP Corporation (NASDAQ:ODP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ODP is 39.4. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and beat the market again by 1.6 percentage points. Unfortunately ODP wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ODP were disappointed as the stock returned -8.1% since the end of June (through 10/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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