With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was The ODP Corporation (NASDAQ:ODP).
Is ODP a good stock to buy now? Hedge funds were buying. The number of bullish hedge fund positions rose by 4 in recent months. The ODP Corporation (NASDAQ:ODP) was in 24 hedge funds’ portfolios at the end of the first quarter of 2021. 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 Q1 rankings). There were 20 hedge funds in our database with ODP positions at the end of the fourth quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Parag Vora of HG Vora Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Keeping this in mind let’s take a look at the new hedge fund action surrounding The ODP Corporation (NASDAQ:ODP).
Do Hedge Funds Think ODP Is A Good Stock To Buy Now?
At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the fourth quarter of 2020. By comparison, 17 hedge funds held shares or bullish call options in ODP a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, HG Vora Capital Management held the most valuable stake in The ODP Corporation (NASDAQ:ODP), which was worth $216.5 million at the end of the fourth quarter. On the second spot was Canyon Capital Advisors which amassed $61.8 million worth of shares. Taconic Capital, Arrowstreet Capital, and Alta Fundamental Advisers 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 HG Vora Capital Management allocated the biggest weight to The ODP Corporation (NASDAQ:ODP), around 11.56% of its 13F portfolio. Alta Fundamental Advisers is also relatively very bullish on the stock, designating 10.5 percent of its 13F equity portfolio to ODP.
As industrywide interest jumped, some big names have been driving this bullishness. Clearline Capital, managed by Marc Majzner, created the most outsized position in The ODP Corporation (NASDAQ:ODP). Clearline Capital had $7.6 million invested in the company at the end of the quarter. Kamyar Khajavi’s MIK Capital also made a $4.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Parvinder Thiara’s Athanor Capital, David Einhorn’s Greenlight Capital, and Carl Tiedemann and Michael Tiedemann’s TIG Advisors.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as The ODP Corporation (NASDAQ:ODP) but similarly valued. These stocks are Hub Group Inc (NASDAQ:HUBG), BancFirst Corporation (NASDAQ:BANF), Cactus, Inc. (NYSE:WHD), NIC Inc. (NASDAQ:EGOV), Welbilt, Inc. (NYSE:WBT), Phreesia, Inc. (NYSE:PHR), and PQ Group Holdings Inc. (NYSE:PQG). All of these stocks’ market caps match ODP’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HUBG | 19 | 229392 | -3 |
| BANF | 4 | 1668 | 2 |
| WHD | 20 | 135752 | 1 |
| EGOV | 34 | 346790 | 19 |
| WBT | 28 | 400427 | 3 |
| PHR | 27 | 213201 | 1 |
| PQG | 8 | 32900 | -1 |
| Average | 20 | 194304 | 3.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $194 million. That figure was $397 million in ODP’s case. NIC Inc. (NASDAQ:EGOV) is the most popular stock in this table. On the other hand BancFirst Corporation (NASDAQ:BANF) is the least popular one with only 4 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 54.7. 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 23.8% in 2021 through July 16th and beat the market again by 7.7 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 2.8% since the end of March (through 7/16) 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.
