Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let’s analyze whether OneSpaWorld Holdings Limited (NASDAQ:OSW) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas.
Is OneSpaWorld Holdings Limited (NASDAQ:OSW) a bargain? Money managers are becoming hopeful. The number of bullish hedge fund bets moved up by 3 lately. Our calculations also showed that OSW isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). OSW was in 11 hedge funds’ portfolios at the end of December. There were 8 hedge funds in our database with OSW holdings at the end of the previous quarter.
In the eyes of most stock holders, hedge funds are seen as underperforming, old investment tools of the past. While there are more than 8000 funds in operation at the moment, Our experts look at the aristocrats of this group, about 850 funds. These hedge fund managers preside over bulk of the hedge fund industry’s total capital, and by observing their inimitable equity investments, Insider Monkey has discovered a few investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Kris Jenner of Rock Springs Capital Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the fresh hedge fund action surrounding OneSpaWorld Holdings Limited (NASDAQ:OSW).
How are hedge funds trading OneSpaWorld Holdings Limited (NASDAQ:OSW)?
At the end of the fourth quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in OSW a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Greenhouse Funds was the largest shareholder of OneSpaWorld Holdings Limited (NASDAQ:OSW), with a stake worth $35.1 million reported as of the end of September. Trailing Greenhouse Funds was Deep Field Asset Management, which amassed a stake valued at $19.5 million. Rock Springs Capital Management, Bayberry Capital Partners, and Select Equity Group 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 Deep Field Asset Management allocated the biggest weight to OneSpaWorld Holdings Limited (NASDAQ:OSW), around 8.38% of its 13F portfolio. Bayberry Capital Partners is also relatively very bullish on the stock, earmarking 6.6 percent of its 13F equity portfolio to OSW.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Rock Springs Capital Management, managed by Kris Jenner, Gordon Bussard, Graham McPhail, established the largest position in OneSpaWorld Holdings Limited (NASDAQ:OSW). Rock Springs Capital Management had $15.2 million invested in the company at the end of the quarter. Angela Aldrich’s Bayberry Capital Partners also initiated a $14.3 million position during the quarter. The following funds were also among the new OSW investors: Andrew Dalrymple and Barry McCorkell’s Aubrey Capital Management, Steve Pigott’s Fort Baker Capital Management, and Renaissance Technologies.
Let’s go over hedge fund activity in other stocks similar to OneSpaWorld Holdings Limited (NASDAQ:OSW). We will take a look at Five Point Holdings, LLC (NYSE:FPH), MAG Silver Corporation (NYSE:MAG), Bain Capital Specialty Finance, Inc. (NYSE:BCSF), and RadNet Inc. (NASDAQ:RDNT). This group of stocks’ market caps are similar to OSW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| FPH | 15 | 216718 | 1 |
| MAG | 10 | 45280 | -2 |
| BCSF | 8 | 40264 | 1 |
| RDNT | 14 | 74415 | -2 |
| Average | 11.75 | 94169 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $114 million in OSW’s case. Five Point Holdings, LLC (NYSE:FPH) is the most popular stock in this table. On the other hand Bain Capital Specialty Finance, Inc. (NYSE:BCSF) is the least popular one with only 8 bullish hedge fund positions. OneSpaWorld Holdings Limited (NASDAQ:OSW) 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. 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 1.0% in 2020 through May 1st but beat the market by 12.9 percentage points. Unfortunately OSW wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); OSW investors were disappointed as the stock returned -64.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
