Outerwall Inc (OUTR): Are Hedge Funds Right About This Stock?

With the third-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 fourth quarter. One of these stocks was Outerwall Inc (NASDAQ:OUTR).

Outerwall Inc (NASDAQ:OUTR) was in 28 hedge funds’ portfolios at the end of September. OUTR investors should be aware of a decrease in hedge fund sentiment of late. There were 30 hedge funds in our database with OUTR positions at the end of the previous quarter. At the end of this article we will also compare OUTR to other stocks including Meritor Inc (NYSE:MTOR), McDermott International (NYSE:MDR), and InfraREIT Inc (NYSE:HIFR) to get a better sense of its popularity.

At the moment there are plenty of gauges stock traders put to use to analyze their holdings. Two of the less known gauges are hedge fund and insider trading activity. We have shown that, historically, those who follow the best picks of the top investment managers can outclass the broader indices by a solid amount (see the details here).

Now, let’s take a peek at the latest action regarding Outerwall Inc (NASDAQ:OUTR).

What does the smart money think about Outerwall Inc (NASDAQ:OUTR)?

At Q3’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from the previous quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Allan Mecham and Ben Raybould’s Arlington Value Capital has the largest position in Outerwall Inc (NASDAQ:OUTR), worth close to $65.4 million, accounting for 8.8% of its total 13F portfolio. The second most bullish fund manager is Fine Capital Partners, led by Debra Fine, holding a $62.6 million position; the fund has 6.2% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism consist of Peter S. Park’s Park West Asset Management, Joel Greenblatt’s Gotham Asset Management and William C. Martin’s Raging Capital Management.

Due to the fact that Outerwall Inc (NASDAQ:OUTR) has experienced bearish sentiment from hedge fund managers, logic holds that there were a few fund managers that decided to sell off their positions entirely last quarter. It’s worth mentioning that Jeffrey Altman’s Owl Creek Asset Management sold off the biggest position of all the hedgies tracked by Insider Monkey, totaling an estimated $26.6 million in call options., and James Dondero’s Highland Capital Management was right behind this move, as the fund dumped about $19 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Outerwall Inc (NASDAQ:OUTR). These stocks are Meritor Inc (NYSE:MTOR), McDermott International (NYSE:MDR), InfraREIT Inc (NYSE:HIFR), and Nortek Inc (NASDAQ:NTK). This group of stocks’ market caps resemble OUTR’s market cap.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $254 million. That figure was $388 million in OUTR’s case. Meritor Inc (NYSE:MTOR) is the most popular stock in this table. On the other hand Nortek Inc (NASDAQ:NTK) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Outerwall Inc (NASDAQ:OUTR) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.