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Did Hedge Funds Drop The Ball On OGE Energy Corp. (OGE) ?

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Reymerlyn Martin
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Is OGE Energy Corp. (NYSE:OGE) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

OGE Energy Corp. (NYSE:OGE) has experienced a decrease in activity from the world's largest hedge funds recently. Our calculations also showed that OGE isn't among the 30 most popular stocks among hedge funds (view the video below).

5 Most Popular Stocks Among Hedge Funds
5 Most Popular Stocks Among Hedge Funds

Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus
Richard Driehaus

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the latest hedge fund action surrounding OGE Energy Corp. (NYSE:OGE).

Hedge fund activity in OGE Energy Corp. (NYSE:OGE)

Heading into the third quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OGE over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

OGE_oct2019
OGE_oct2019

Among these funds, Renaissance Technologies held the most valuable stake in OGE Energy Corp. (NYSE:OGE), which was worth $53.5 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $44.9 million worth of shares. Moreover, GLG Partners, ExodusPoint Capital, and Millennium Management were also bullish on OGE Energy Corp. (NYSE:OGE), allocating a large percentage of their portfolios to this stock.

Because OGE Energy Corp. (NYSE:OGE) has witnessed bearish sentiment from the entirety of the hedge funds we track, it's safe to say that there exists a select few hedge funds that elected to cut their positions entirely in the second quarter. Intriguingly, Phill Gross and Robert Atchinson's Adage Capital Management sold off the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $32.3 million in stock. Andrew Feldstein and Stephen Siderow's fund, Blue Mountain Capital, also said goodbye to its stock, about $6.4 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds in the second quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as OGE Energy Corp. (NYSE:OGE) but similarly valued. We will take a look at Westlake Chemical Corporation (NYSE:WLK), SEI Investments Company (NASDAQ:SEIC), Formula One Group (NASDAQ:FWONK), and Service Corporation International (NYSE:SCI). This group of stocks' market valuations are closest to OGE's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WLK,23,313524,-3 SEIC,22,396971,-2 FWONK,32,1760806,-3 SCI,15,424862,-5 Average,23,724041,-3.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $724 million. That figure was $136 million in OGE's case. Formula One Group (NASDAQ:FWONK) is the most popular stock in this table. On the other hand Service Corporation International (NYSE:SCI) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks OGE Energy Corp. (NYSE:OGE) is even less popular than SCI. Hedge funds clearly dropped the ball on OGE as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on OGE as the stock returned 7.5% during the third quarter and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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