Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Oceaneering International, Inc. (NYSE:OII) to find out whether it was one of their high conviction long-term ideas.
Oceaneering International, Inc. (NYSE:OII) investors should be aware of an increase in hedge fund interest recently. Our calculations also showed that OII isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
If you’d ask most investors, hedge funds are perceived as underperforming, old financial tools of yesteryear. While there are more than 8000 funds trading today, Our researchers hone in on the moguls of this club, around 750 funds. These investment experts orchestrate most of all hedge funds’ total capital, and by keeping an eye on their finest stock picks, Insider Monkey has uncovered several investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Steven Cohen of Point72 Asset Management
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing Oceaneering International, Inc. (NYSE:OII).
What have hedge funds been doing with Oceaneering International, Inc. (NYSE:OII)?
Heading into the fourth quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in OII a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Oceaneering International, Inc. (NYSE:OII), with a stake worth $48 million reported as of the end of September. Trailing Fisher Asset Management was Citadel Investment Group, which amassed a stake valued at $40.2 million. Balyasny Asset Management, AQR Capital Management, and Point72 Asset Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Oceaneering International, Inc. (NYSE:OII), around 1.24% of its 13F portfolio. Algert Coldiron Investors is also relatively very bullish on the stock, setting aside 0.43 percent of its 13F equity portfolio to OII.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. SIR Capital Management, managed by Vince Maddi and Shawn Brennan, initiated the largest position in Oceaneering International, Inc. (NYSE:OII). SIR Capital Management had $5 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also initiated a $3.2 million position during the quarter. The other funds with brand new OII positions are Brandon Haley’s Holocene Advisors, Minhua Zhang’s Weld Capital Management, and Anand Parekh’s Alyeska Investment Group.
Let’s now take a look at hedge fund activity in other stocks similar to Oceaneering International, Inc. (NYSE:OII). We will take a look at Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), Ping Identity Holding Corp. (NYSE:PING), Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL), and Osisko Gold Royalties Ltd (NYSE:OR). This group of stocks’ market values match OII’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IRWD | 22 | 249690 | 1 |
| PING | 18 | 70018 | 18 |
| MDGL | 12 | 264363 | 0 |
| OR | 13 | 42365 | 1 |
| Average | 16.25 | 156609 | 5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $191 million in OII’s case. Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) is the most popular stock in this table. On the other hand Madrigal Pharmaceuticals, Inc. (NASDAQ:MDGL) is the least popular one with only 12 bullish hedge fund positions. Oceaneering International, Inc. (NYSE:OII) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately OII wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OII were disappointed as the stock returned -1% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
