We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Norbord Inc. (NYSE:OSB) and determine whether hedge funds skillfully traded this stock.
Norbord Inc. (NYSE:OSB) investors should pay attention to a decrease in activity from the world’s largest hedge funds of late. OSB was in 12 hedge funds’ portfolios at the end of the first quarter of 2020. There were 16 hedge funds in our database with OSB holdings at the end of the previous quarter. Our calculations also showed that OSB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are tons of tools stock market investors use to appraise publicly traded companies. Two of the most useful tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top investment managers can outperform their index-focused peers by a healthy amount (see the details here).
Donald Sussman of Paloma Partners
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the fresh hedge fund action regarding Norbord Inc. (NYSE:OSB).
How are hedge funds trading Norbord Inc. (NYSE:OSB)?
Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in OSB 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.
The largest stake in Norbord Inc. (NYSE:OSB) was held by Point72 Asset Management, which reported holding $4.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $3.8 million position. Other investors bullish on the company included Millennium Management, Mountaineer Partners Management, and Schonfeld Strategic Advisors. In terms of the portfolio weights assigned to each position Mountaineer Partners Management allocated the biggest weight to Norbord Inc. (NYSE:OSB), around 4.66% of its 13F portfolio. Jade Capital Advisors is also relatively very bullish on the stock, earmarking 0.37 percent of its 13F equity portfolio to OSB.
Due to the fact that Norbord Inc. (NYSE:OSB) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of hedgies that elected to cut their entire stakes last quarter. At the top of the heap, John Overdeck and David Siegel’s Two Sigma Advisors dropped the biggest investment of the 750 funds followed by Insider Monkey, worth an estimated $5.1 million in stock. Karim Abbadi and Edward McBride’s fund, Centiva Capital, also cut its stock, about $0.9 million worth. These transactions are interesting, as total hedge fund interest dropped by 4 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to Norbord Inc. (NYSE:OSB). These stocks are Black Stone Minerals LP (NYSE:BSM), Callaway Golf Company (NYSE:ELY), OceanFirst Financial Corp. (NASDAQ:OCFC), and WESCO International, Inc. (NYSE:WCC). This group of stocks’ market caps are closest to OSB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BSM | 3 | 2190 | -1 |
| ELY | 23 | 120223 | 3 |
| OCFC | 9 | 28760 | -6 |
| WCC | 32 | 221143 | 6 |
| Average | 16.75 | 93079 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $19 million in OSB’s case. WESCO International, Inc. (NYSE:WCC) is the most popular stock in this table. On the other hand Black Stone Minerals LP (NYSE:BSM) is the least popular one with only 3 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on OSB as the stock returned 93% during the second quarter and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
