Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Norbord Inc. (NYSE:OSB)? The smart money sentiment can provide an answer to this question.
Is Norbord Inc. (NYSE:OSB) a bargain? Investors who are in the know are turning bullish. The number of long hedge fund positions rose by 1 in recent months. Our calculations also showed that osb isn’t among the 30 most popular stocks among hedge funds.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
We’re going to take a gander at the key hedge fund action surrounding Norbord Inc. (NYSE:OSB).
How have hedgies been trading Norbord Inc. (NYSE:OSB)?
Heading into the fourth quarter of 2018, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 11% from the previous quarter. On the other hand, there were a total of 9 hedge funds with a bullish position in OSB at the beginning of this year. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Norbord Inc. (NYSE:OSB), which was worth $12 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $8.7 million worth of shares. Moreover, AQR Capital Management, D E Shaw, and Citadel Investment Group were also bullish on Norbord Inc. (NYSE:OSB), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, specific money managers have jumped into Norbord Inc. (NYSE:OSB) headfirst. Citadel Investment Group, managed by Ken Griffin, created the most outsized position in Norbord Inc. (NYSE:OSB). Citadel Investment Group had $1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.6 million investment in the stock during the quarter. The following funds were also among the new OSB investors: Dmitry Balyasny’s Balyasny Asset Management and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Norbord Inc. (NYSE:OSB) but similarly valued. These stocks are Tempur Sealy International Inc. (NYSE:TPX), Amtrust Financial Services, Inc. (NASDAQ:AFSI), Cactus, Inc. (NYSE:WHD), and Eaton Vance Tax-Managed Global Diversified Equity Income Fund (NYSE:EXG). This group of stocks’ market caps match OSB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TPX | 30 | 1182122 | 5 |
| AFSI | 12 | 343088 | 1 |
| WHD | 17 | 203276 | 1 |
| EXG | 2 | 536 | 1 |
| Average | 15.25 | 432256 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $432 million. That figure was $32 million in OSB’s case. Tempur Sealy International Inc. (NYSE:TPX) is the most popular stock in this table. On the other hand Eaton Vance Tax-Managed Global Diversified Equity Income Fund (NYSE:EXG) is the least popular one with only 2 bullish hedge fund positions. Norbord Inc. (NYSE:OSB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TPX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
