At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Oceaneering International, Inc. (NYSE:OII) has experienced an increase in activity from the world's largest hedge funds of late. OII was in 16 hedge funds' portfolios at the end of December. There were 12 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.
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 market by 32 percentage points since May 2014 through March 12, 2019 (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 our short portfolio.
Let's check out the fresh hedge fund action surrounding Oceaneering International, Inc. (NYSE:OII).
What does the smart money think about Oceaneering International, Inc. (NYSE:OII)?
At Q4's end, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in OII a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Fisher Asset Management was the largest shareholder of Oceaneering International, Inc. (NYSE:OII), with a stake worth $37.4 million reported as of the end of December. Trailing Fisher Asset Management was AQR Capital Management, which amassed a stake valued at $8.7 million. Point72 Asset Management, D E Shaw, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key hedge funds have jumped into Oceaneering International, Inc. (NYSE:OII) headfirst. Renaissance Technologies, managed by Jim Simons, assembled the biggest position in Oceaneering International, Inc. (NYSE:OII). Renaissance Technologies had $6.8 million invested in the company at the end of the quarter. Israel Englander's Millennium Management also made a $5.3 million investment in the stock during the quarter. The following funds were also among the new OII investors: Thiru Ramakrishnan's TVR Capital, Joel Greenblatt's Gotham Asset Management, and Ryan Caldwell's Chiron Investment Management.
Let's check out hedge fund activity in other stocks similar to Oceaneering International, Inc. (NYSE:OII). We will take a look at Getty Realty Corp. (NYSE:GTY), Masonite International Corp (NYSE:DOOR), WSFS Financial Corporation (NASDAQ:WSFS), and Suburban Propane Partners LP (NYSE:SPH). This group of stocks' market valuations resemble OII's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GTY,8,82062,0 DOOR,19,215680,-2 WSFS,12,115665,2 SPH,5,76397,1 Average,11,122451,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $85 million in OII's case. Masonite International Corp (NYSE:DOOR) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 5 bullish hedge fund positions. Oceaneering International, Inc. (NYSE:OII) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on OII as the stock returned 47.5% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.