Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Olaplex Holdings Inc. (NASDAQ:OLPX) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Is Olaplex Holdings Inc. (NASDAQ:OLPX) undervalued? Hedge funds were taking an optimistic view. The number of bullish hedge fund bets improved by 52 lately. Olaplex Holdings Inc. (NASDAQ:OLPX) was in 52 hedge funds’ portfolios at the end of September. Our calculations also showed that OLPX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
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. With all of this in mind let’s go over the latest hedge fund action surrounding Olaplex Holdings Inc. (NASDAQ:OLPX).
Do Hedge Funds Think OLPX Is A Good Stock To Buy Now?
At the end of September, a total of 52 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 52 from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in OLPX over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Melvin Capital Management was the largest shareholder of Olaplex Holdings Inc. (NASDAQ:OLPX), with a stake worth $104.1 million reported as of the end of September. Trailing Melvin Capital Management was Citadel Investment Group, which amassed a stake valued at $102.7 million. Viking Global, Holocene Advisors, and Millennium 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 Element Capital Management allocated the biggest weight to Olaplex Holdings Inc. (NASDAQ:OLPX), around 13.6% of its 13F portfolio. Atika Capital is also relatively very bullish on the stock, setting aside 1.62 percent of its 13F equity portfolio to OLPX.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Melvin Capital Management, managed by Gabriel Plotkin, established the largest position in Olaplex Holdings Inc. (NASDAQ:OLPX). Melvin Capital Management had $104.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $102.7 million investment in the stock during the quarter. The other funds with brand new OLPX positions are Andreas Halvorsen’s Viking Global, Brandon Haley’s Holocene Advisors, and Israel Englander’s Millennium Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Olaplex Holdings Inc. (NASDAQ:OLPX) but similarly valued. We will take a look at WPP Plc (NASDAQ:WPP), James Hardie Industries plc (NYSE:JHX), Molina Healthcare, Inc. (NYSE:MOH), Quanta Services Inc (NYSE:PWR), IDEX Corporation (NYSE:IEX), UDR, Inc. (NYSE:UDR), and The Liberty SiriusXM Group (NASDAQ:LSXMA). This group of stocks’ market valuations match OLPX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WPP | 5 | 15930 | -1 |
| JHX | 5 | 13962 | 1 |
| MOH | 28 | 1539147 | -6 |
| PWR | 38 | 1526790 | -2 |
| IEX | 18 | 1047528 | -4 |
| UDR | 20 | 353763 | -4 |
| LSXMA | 44 | 1901086 | 1 |
| Average | 22.6 | 914029 | -2.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $914 million. That figure was $711 million in OLPX’s case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand WPP Plc (NASDAQ:WPP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Olaplex Holdings Inc. (NASDAQ:OLPX) is more popular among hedge funds. Our overall hedge fund sentiment score for OLPX is 90. 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. Unfortunately, OLPX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on OLPX were disappointed as the stock returned -10.9% since the end of the third quarter (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
