Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Olin Corporation (NYSE:OLN).
Is Olin Corporation (NYSE:OLN) a superb stock to buy now? Prominent investors were buying. The number of bullish hedge fund bets advanced by 11 in recent months. Olin Corporation (NYSE:OLN) was in 34 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that OLN isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 23 hedge funds in our database with OLN 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.
Robert Atchinson of Adage Capital Management
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 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. With all of this in mind let’s take a look at the fresh hedge fund action regarding Olin Corporation (NYSE:OLN).
Do Hedge Funds Think OLN Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 48% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in OLN a year ago. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Olin Corporation (NYSE:OLN) was held by Sachem Head Capital, which reported holding $567.7 million worth of stock at the end of December. It was followed by Pzena Investment Management with a $178 million position. Other investors bullish on the company included East Side Capital (RR Partners), Adage Capital Management, and Royce & Associates. In terms of the portfolio weights assigned to each position East Side Capital (RR Partners) allocated the biggest weight to Olin Corporation (NYSE:OLN), around 15.42% of its 13F portfolio. Sachem Head Capital is also relatively very bullish on the stock, setting aside 15.36 percent of its 13F equity portfolio to OLN.
Consequently, specific money managers were leading the bulls’ herd. Moore Global Investments, managed by Louis Bacon, created the biggest position in Olin Corporation (NYSE:OLN). Moore Global Investments had $8.3 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $7.3 million investment in the stock during the quarter. The other funds with brand new OLN positions are Robert Vincent McHugh’s Jade Capital Advisors, Alexander Mitchell’s Scopus Asset Management, and Ed Bosek’s BeaconLight Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Olin Corporation (NYSE:OLN) but similarly valued. These stocks are KT Corporation (NYSE:KT), Brixmor Property Group Inc (NYSE:BRX), Ardagh Group S.A. (NYSE:ARD), Nordstrom, Inc. (NYSE:JWN), Virtu Financial Inc (NASDAQ:VIRT), Halozyme Therapeutics, Inc. (NASDAQ:HALO), and Choice Hotels International, Inc. (NYSE:CHH). This group of stocks’ market valuations match OLN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KT | 12 | 166402 | 1 |
| BRX | 18 | 127975 | 12 |
| ARD | 11 | 125401 | 3 |
| JWN | 34 | 293042 | 0 |
| VIRT | 22 | 301753 | -5 |
| HALO | 23 | 210743 | -2 |
| CHH | 17 | 123430 | 2 |
| Average | 19.6 | 192678 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $193 million. That figure was $1171 million in OLN’s case. Nordstrom, Inc. (NYSE:JWN) is the most popular stock in this table. On the other hand Ardagh Group S.A. (NYSE:ARD) is the least popular one with only 11 bullish hedge fund positions. Olin Corporation (NYSE:OLN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OLN is 89.1. 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. 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on OLN as the stock returned 23.4% since the end of Q1 (through 6/25) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
