Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors' consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Overstock.com, Inc. (NASDAQ:OSTK) from the perspective of those elite funds.
Is Overstock.com, Inc. (NASDAQ:OSTK) a worthy stock to buy now? Prominent investors are turning less bullish. The number of long hedge fund bets went down by 6 in recent months. Our calculations also showed that OSTK isn't among the 30 most popular stocks among hedge funds.
In the 21st century investor’s toolkit there are a large number of metrics investors have at their disposal to grade stocks. A couple of the most underrated metrics are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the elite money managers can outperform their index-focused peers by a superb amount (see the details here).
Let's take a glance at the new hedge fund action regarding Overstock.com, Inc. (NASDAQ:OSTK).
How have hedgies been trading Overstock.com, Inc. (NASDAQ:OSTK)?
Heading into the first quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in OSTK a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of Overstock.com, Inc. (NASDAQ:OSTK), with a stake worth $5.7 million reported as of the end of December. Trailing Citadel Investment Group was Point72 Asset Management, which amassed a stake valued at $5.4 million. CSat Investment Advisory, OZ Management, and Balyasny Asset Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because Overstock.com, Inc. (NASDAQ:OSTK) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of hedgies who sold off their entire stakes in the third quarter. At the top of the heap, Peter S. Park's Park West Asset Management sold off the biggest investment of the 700 funds monitored by Insider Monkey, worth an estimated $27.7 million in call options, and Sander Gerber's Hudson Bay Capital Management was right behind this move, as the fund cut about $7.1 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 6 funds in the third quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Overstock.com, Inc. (NASDAQ:OSTK) but similarly valued. We will take a look at CURO Group Holdings Corp. (NYSE:CURO), TORM plc (NASDAQ:TRMD), International Money Express, Inc. (NASDAQ:IMXI), and Sentinel Energy Services Inc. (NASDAQ:STNL). This group of stocks' market caps are similar to OSTK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CURO,10,76163,-6 TRMD,3,347978,1 IMXI,10,61880,-1 STNL,16,166408,1 Average,9.75,163107,-1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $163 million. That figure was $20 million in OSTK's case. Sentinel Energy Services Inc. (NASDAQ:STNL) is the most popular stock in this table. On the other hand TORM plc (NASDAQ:TRMD) is the least popular one with only 3 bullish hedge fund positions. Overstock.com, Inc. (NASDAQ:OSTK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately OSTK wasn't nearly as popular as these 15 stock and hedge funds that were betting on OSTK were disappointed as the stock returned 2.1% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.