Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Otis Worldwide Corporation (NYSE:OTIS).
Is Otis Worldwide Corporation (NYSE:OTIS) a bargain? Prominent investors were taking an optimistic view. The number of long hedge fund positions advanced by 6 in recent months. Otis Worldwide Corporation (NYSE:OTIS) was in 59 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic was previously 56. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OTIS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Aaron Cowen of Suvretta Capital Management
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Do Hedge Funds Think OTIS Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 59 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the third quarter of 2020. The graph below displays the number of hedge funds with bullish position in OTIS over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Otis Worldwide Corporation (NYSE:OTIS) was held by Viking Global, which reported holding $364.6 million worth of stock at the end of December. It was followed by Deccan Value Advisors with a $357.3 million position. Other investors bullish on the company included Ako Capital, Suvretta Capital Management, and Gates Capital Management. In terms of the portfolio weights assigned to each position Deccan Value Advisors allocated the biggest weight to Otis Worldwide Corporation (NYSE:OTIS), around 14.5% of its 13F portfolio. Sandbar Asset Management is also relatively very bullish on the stock, designating 11.4 percent of its 13F equity portfolio to OTIS.
Consequently, key money managers were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, assembled the largest position in Otis Worldwide Corporation (NYSE:OTIS). Two Sigma Advisors had $17.4 million invested in the company at the end of the quarter. Terry Smith’s Fundsmith Long/Short Fund also made a $4.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Ian Simm’s Impax Asset Management, Jonathan Dawson’s Southport Management, and Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Otis Worldwide Corporation (NYSE:OTIS) but similarly valued. These stocks are Rockwell Automation Inc. (NYSE:ROK), EOG Resources Inc (NYSE:EOG), Banco Bradesco SA (NYSE:BBD), WEC Energy Group, Inc. (NYSE:WEC), Teladoc Health, Inc (NYSE:TDOC), Huazhu Group Limited (NASDAQ:HTHT), and Corteva, Inc. (NYSE:CTVA). This group of stocks’ market values are closest to OTIS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROK | 35 | 635317 | -9 |
| EOG | 45 | 750152 | 9 |
| BBD | 17 | 407632 | -3 |
| WEC | 25 | 245402 | 3 |
| TDOC | 50 | 2616714 | 3 |
| HTHT | 23 | 612105 | 2 |
| CTVA | 38 | 1398326 | 2 |
| Average | 33.3 | 952235 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.3 hedge funds with bullish positions and the average amount invested in these stocks was $952 million. That figure was $2512 million in OTIS’s case. Teladoc Health, Inc (NYSE:TDOC) is the most popular stock in this table. On the other hand Banco Bradesco SA (NYSE:BBD) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Otis Worldwide Corporation (NYSE:OTIS) is more popular among hedge funds. Our overall hedge fund sentiment score for OTIS 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks returned 13.6% in 2021 through April 30th but still managed to beat the market by 1.6 percentage points. Hedge funds were also right about betting on OTIS as the stock returned 15.6% since the end of December (through 4/30) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
