In this article we will check out the progression of hedge fund sentiment towards Oceaneering International (NYSE:OII) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Oceaneering International (NYSE:OII) has seen a decrease in activity from the world's largest hedge funds lately. OII was in 19 hedge funds' portfolios at the end of March. There were 24 hedge funds in our database with OII holdings at the end of the previous quarter. Our calculations also showed that OII isn't among the 30 most popular stocks among hedge funds (click for Q1 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
[caption id="attachment_256989" align="aligncenter" width="400"] Dmitry Balyasny of Balyasny Asset Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we're going to take a look at the key hedge fund action surrounding Oceaneering International (NYSE:OII).
How are hedge funds trading Oceaneering International (NYSE:OII)?
At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards OII over the last 18 quarters. With the smart money's sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Oceaneering International (NYSE:OII), with a stake worth $7.7 million reported as of the end of September. Trailing Fisher Asset Management was D E Shaw, which amassed a stake valued at $7.5 million. Balyasny Asset Management, Citadel Investment Group, and PDT Partners 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 PDT Partners allocated the biggest weight to Oceaneering International (NYSE:OII), around 0.11% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, earmarking 0.05 percent of its 13F equity portfolio to OII.
Since Oceaneering International (NYSE:OII) has experienced falling interest from the entirety of the hedge funds we track, we can see that there is a sect of fund managers who were dropping their full holdings in the first quarter. Interestingly, Vince Maddi and Shawn Brennan's SIR Capital Management cut the largest position of the 750 funds watched by Insider Monkey, valued at close to $3.2 million in stock, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital was right behind this move, as the fund dumped about $1 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 5 funds in the first quarter.
Let's now review hedge fund activity in other stocks similar to Oceaneering International (NYSE:OII). We will take a look at Clarus Corporation (NASDAQ:CLAR), Financial Institutions, Inc. (NASDAQ:FISI), Craft Brew Alliance Inc (NASDAQ:BREW), and Alerus Financial Corporation (NASDAQ:ALRS). All of these stocks' market caps are closest to OII's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLAR,11,34032,0 FISI,11,23795,0 BREW,11,14971,4 ALRS,1,231,-1 Average,8.5,18257,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $30 million in OII's case. Clarus Corporation (NASDAQ:CLAR) is the most popular stock in this table. On the other hand Alerus Financial Corporation (NASDAQ:ALRS) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Oceaneering International (NYSE:OII) is more popular among hedge funds. 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 returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on OII as the stock returned 127.9% so far in Q2 (through June 22nd) 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.
Disclosure: None. This article was originally published at Insider Monkey.