How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Otis Worldwide Corporation (NYSE:OTIS).
Otis Worldwide Corporation (NYSE:OTIS) was in 56 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 4. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. OTIS shareholders have witnessed an increase in activity from the world’s largest hedge funds recently. There were 4 hedge funds in our database with OTIS positions at the end of the first quarter. Our calculations also showed that OTIS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the eyes of most stock holders, hedge funds are viewed as underperforming, old investment vehicles of the past. While there are greater than 8000 funds with their doors open today, Our experts look at the elite of this group, around 850 funds. Most estimates calculate that this group of people administer most of the hedge fund industry’s total asset base, and by keeping track of their matchless stock picks, Insider Monkey has spotted a number of investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Jeffrey Gates of Gates Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now let’s take a gander at the latest hedge fund action encompassing Otis Worldwide Corporation (NYSE:OTIS).
Hedge fund activity in Otis Worldwide Corporation (NYSE:OTIS)
At the end of the second quarter, a total of 56 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 1300% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards OTIS over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Ako Capital was the largest shareholder of Otis Worldwide Corporation (NYSE:OTIS), with a stake worth $304.4 million reported as of the end of September. Trailing Ako Capital was Deccan Value Advisors, which amassed a stake valued at $252.9 million. Adage Capital Management, Suvretta Capital Management, and Gates 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 Sandbar Asset Management allocated the biggest weight to Otis Worldwide Corporation (NYSE:OTIS), around 15.39% of its 13F portfolio. Deccan Value Advisors is also relatively very bullish on the stock, earmarking 13.05 percent of its 13F equity portfolio to OTIS.
As industrywide interest jumped, key money managers were breaking ground themselves. Ako Capital, managed by Nicolai Tangen, assembled the largest position in Otis Worldwide Corporation (NYSE:OTIS). Ako Capital had $304.4 million invested in the company at the end of the quarter. Vinit Bodas’s Deccan Value Advisors also made a $252.9 million investment in the stock during the quarter. The other funds with brand new OTIS positions are Phill Gross and Robert Atchinson’s Adage Capital Management, Aaron Cowen’s Suvretta Capital Management, and Ken Fisher’s Fisher Asset Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Otis Worldwide Corporation (NYSE:OTIS) but similarly valued. These stocks are Fastenal Company (NASDAQ:FAST), Barclays PLC (NYSE:BCS), STMicroelectronics N.V. (NYSE:STM), Nikola Corporation (NASDAQ:NKLA), Marathon Petroleum Corp (NYSE:MPC), Ford Motor Company (NYSE:F), and Prudential Financial Inc (NYSE:PRU). This group of stocks’ market valuations match OTIS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FAST | 34 | 633636 | 0 |
| BCS | 8 | 35407 | -5 |
| STM | 12 | 55960 | 1 |
| NKLA | 29 | 1382479 | 16 |
| MPC | 62 | 1444528 | 5 |
| F | 30 | 791591 | -3 |
| PRU | 26 | 437049 | -2 |
| Average | 28.7 | 682950 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $683 million. That figure was $2110 million in OTIS’s case. Marathon Petroleum Corp (NYSE:MPC) is the most popular stock in this table. On the other hand Barclays PLC (NYSE:BCS) is the least popular one with only 8 bullish hedge fund positions. Otis Worldwide Corporation (NYSE:OTIS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OTIS is 84.4. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 29.2% in 2020 through October 16th and still beat the market by 19.7 percentage points. Hedge funds were also right about betting on OTIS, though not to the same extent, as the stock returned 14.7% since Q2 (through October 16th) and outperformed the market as well.
Follow Otis Worldwide Corp (NYSE:OTIS)
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Disclosure: None. This article was originally published at Insider Monkey.
