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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards OFG Bancorp (NYSE:OFG).
OFG Bancorp (NYSE:OFG) investors should pay attention to a decrease in hedge fund interest recently. OFG was in 14 hedge funds' portfolios at the end of September. There were 18 hedge funds in our database with OFG holdings at the end of the previous quarter. Our calculations also showed that OFG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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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. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a look at the recent hedge fund action encompassing OFG Bancorp (NYSE:OFG).
What have hedge funds been doing with OFG Bancorp (NYSE:OFG)?
At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -22% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in OFG a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in OFG Bancorp (NYSE:OFG), which was worth $12.8 million at the end of the third quarter. On the second spot was Driehaus Capital which amassed $10.5 million worth of shares. Renaissance Technologies, Arrowstreet Capital, and Polaris Capital Management 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 Driehaus Capital allocated the biggest weight to OFG Bancorp (NYSE:OFG), around 0.34% of its 13F portfolio. Polaris Capital Management is also relatively very bullish on the stock, dishing out 0.24 percent of its 13F equity portfolio to OFG.
Judging by the fact that OFG Bancorp (NYSE:OFG) has faced falling interest from hedge fund managers, it's easy to see that there was a specific group of fund managers that decided to sell off their entire stakes last quarter. Interestingly, Steve Cohen's Point72 Asset Management sold off the largest investment of all the hedgies tracked by Insider Monkey, totaling an estimated $2 million in stock, and Hoon Kim's Quantinno Capital was right behind this move, as the fund dumped about $0.7 million worth. These moves are important to note, as total hedge fund interest was cut by 4 funds last quarter.
Let's check out hedge fund activity in other stocks similar to OFG Bancorp (NYSE:OFG). We will take a look at Canadian Solar Inc. (NASDAQ:CSIQ), Gossamer Bio, Inc. (NASDAQ:GOSS), TriCo Bancshares (NASDAQ:TCBK), and Matthews International Corp (NASDAQ:MATW). This group of stocks' market caps resemble OFG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CSIQ,17,115434,4 GOSS,9,161966,-2 TCBK,9,44155,1 MATW,9,37537,-4 Average,11,89773,-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 $90 million. That figure was $65 million in OFG's case. Canadian Solar Inc. (NASDAQ:CSIQ) is the most popular stock in this table. On the other hand Gossamer Bio, Inc. (NASDAQ:GOSS) is the least popular one with only 9 bullish hedge fund positions. OFG Bancorp (NYSE:OFG) 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately OFG wasn't nearly as popular as these 20 stocks and hedge funds that were betting on OFG were disappointed as the stock returned -2.1% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.