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 follow the hedge fund activity in the small-cap space.
Oi SA (ADR) (NYSE:OIBR) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 13 hedge funds’ portfolios at the end of the third quarter of 2015. At the end of this article we will also compare Oi SA to other stocks including Nautilus, Inc. (NYSE:NLS), China Yuchai International Limited (NYSE:CYD), and Clayton Williams Energy, Inc. (NASDAQ:CWEI) to get a better sense of its popularity.
According to most investors, hedge funds are seen as unimportant, old financial vehicles of yesteryear. While there are more than 8,000 funds trading today, our experts choose to focus on the top tier of this club, approximately 700 funds. These hedge fund managers shepherd most of the smart money’s total capital, and by keeping an eye on their finest stock picks, Insider Monkey has unsheathed numerous investment strategies that have historically exceeded the broader indices. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points annually for a decade in their back tests.
With all of this in mind, let’s take a gander at the latest action surrounding Oi SA (ADR) (NYSE:OIBR).
What does the smart money think about Oi SA (ADR) (NYSE:OIBR)?
Heading into Q4, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or had already accumulated large positions).
Of the funds tracked by Insider Monkey, Paulson & Co, managed by John Paulson, holds the number one position in Oi SA (ADR) (NYSE:OIBR). Paulson & Co has a $17.2 million position in the stock, comprising 0.1% of its 13F portfolio. The second-largest stake is held by Elliott Management, managed by Paul Singer, which holds a $6.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism contain Boaz Weinstein’s Saba Capital, and Youlia Miteva’s Proxima Capital Management.
Because Oi SA (ADR) (NYSE:OIBR) has faced neutral sentiment from the aggregate hedge fund industry, we can see that at least one fund also chose to sell off the stock during the third quarter. That fund was John Bader’s Halcyon Asset Management, which sold off the biggest position of all the hedgies watched by Insider Monkey, valued at close to $3.4 million in stock.
Let’s check out hedge fund activity in other stocks similar to Oi SA (ADR) (NYSE:OIBR). These stocks are Nautilus, Inc. (NYSE:NLS), China Yuchai International Limited (NYSE:CYD), Clayton Williams Energy, Inc. (NASDAQ:CWEI), and Dynagas LNG Partners LP (NYSE:DLNG). All of these stocks’ market caps are similar to Oi SA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NLS | 27 | 74730 | 7 |
| CYD | 9 | 46656 | 1 |
| CWEI | 11 | 121619 | 3 |
| DLNG | 5 | 15614 | -2 |
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $34 million in Oi SA’s case. Nautilus, Inc. (NYSE:NLS) is the most popular stock in this table. On the other hand Dynagas LNG Partners LP (NYSE:DLNG) is the least popular one with only 5 bullish hedge fund positions. Oi SA (ADR) (NYSE:OIBR) 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 Nautilus might be a better candidate to consider a long position in.
