Should You Buy OneBeacon Insurance Group, Ltd. (OB)?

Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.

Hedge fund interest in OneBeacon Insurance Group, Ltd. (NYSE:OB) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare OB to other stocks including Advanced Micro Devices, Inc. (NASDAQ:AMD), Descartes Systems Group (USA) (NASDAQ:DSGX), and Sarepta Therapeutics Inc (NASDAQ:SRPT) to get a better sense of its popularity.

With all of this in mind, we’re going to take a peek at the new action surrounding OneBeacon Insurance Group, Ltd. (NYSE:OB).

What does the smart money think about OneBeacon Insurance Group, Ltd. (NYSE:OB)?

Heading into Q4, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from one quarter earlier. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Porter Collins, Daniel Moses, and Vincent Daniel’s Seawolf Capital has the number one position in OneBeacon Insurance Group, Ltd. (NYSE:OB), worth close to $3.5 million, corresponding to 0.9% of its total 13F portfolio. The second most bullish fund manager is Jim Simons of Renaissance Technologies, with a $1.5 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism contain Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors and Lawrence Sapanski’s Scoria Capital.

Interestingly, Peter Muller’s PDT Partners said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, worth an estimated $0.4 million in stock. Mike Vranos’s fund, Ellington, also sold off its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks similar to OneBeacon Insurance Group, Ltd. (NYSE:OB). These stocks are Advanced Micro Devices, Inc. (NASDAQ:AMD), Descartes Systems Group (USA) (NASDAQ:DSGX), Sarepta Therapeutics Inc (NASDAQ:SRPT), and Scholastic Corp (NASDAQ:SCHL). This group of stocks’ market valuations are similar to OB’s market valuation.

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 $119 million. That figure was $12 million in OB’s case. Sarepta Therapeutics Inc (NASDAQ:SRPT) is the most popular stock in this table. On the other hand Descartes Systems Group (USA) (NASDAQ:DSGX) is the least popular one with only 4 bullish hedge fund positions. OneBeacon Insurance Group, Ltd. (NYSE:OB) 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 SRPT might be a better candidate to consider a long position.