We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Olin Corporation (NYSE:OLN) and determine whether hedge funds skillfully traded this stock.
Olin Corporation (NYSE:OLN) shareholders have witnessed an increase in enthusiasm from smart money of late. Olin Corporation (NYSE:OLN) was in 43 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OLN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind we’re going to review the latest hedge fund action surrounding Olin Corporation (NYSE:OLN).
Do Hedge Funds Think OLN Is A Good Stock To Buy Now?
At Q3’s end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the previous quarter. By comparison, 33 hedge funds held shares or bullish call options in OLN a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Sachem Head Capital held the most valuable stake in Olin Corporation (NYSE:OLN), which was worth $576.6 million at the end of the third quarter. On the second spot was Pzena Investment Management which amassed $163.7 million worth of shares. Millennium Management, Renaissance Technologies, and Adage Capital 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 Sachem Head Capital allocated the biggest weight to Olin Corporation (NYSE:OLN), around 14.22% of its 13F portfolio. Mountaineer Partners Management is also relatively very bullish on the stock, designating 7.47 percent of its 13F equity portfolio to OLN.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Appian Way Asset Management, managed by Andrew Byington, assembled the biggest position in Olin Corporation (NYSE:OLN). Appian Way Asset Management had $10.2 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $8.8 million investment in the stock during the quarter. The other funds with brand new OLN positions are John Bader’s Halcyon Asset Management, Andrew Sandler’s Sandler Capital Management, and Mike Masters’s Masters Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Olin Corporation (NYSE:OLN). We will take a look at EQT Corporation (NYSE:EQT), Globus Medical Inc (NYSE:GMED), US Foods Holding Corp. (NYSE:USFD), AerCap Holdings N.V. (NYSE:AER), Kilroy Realty Corp (NYSE:KRC), Apartment Income REIT Corp. (NYSE:AIRC), and Lincoln Electric Holdings, Inc. (NASDAQ:LECO). All of these stocks’ market caps resemble OLN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EQT | 57 | 838226 | 14 |
| GMED | 37 | 266753 | 2 |
| USFD | 29 | 1071095 | -6 |
| AER | 42 | 1448787 | -3 |
| KRC | 24 | 422839 | -2 |
| AIRC | 17 | 270935 | 3 |
| LECO | 21 | 288792 | 1 |
| Average | 32.4 | 658204 | 1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $658 million. That figure was $1170 million in OLN’s case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Apartment Income REIT Corp. (NYSE:AIRC) is the least popular one with only 17 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 72.5. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on OLN as the stock returned 5.4% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Olin Corp (NYSE:OLN)
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Disclosure: None. This article was originally published at Insider Monkey.
