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Is OHA Investment Corporation (OHAI) A Good Stock To Buy ?

Nina Todic

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing more than 750 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September 30th, 2019. What do these smart investors think about OHA Investment Corporation (NASDAQ:OHAI)?

OHA Investment Corporation (NASDAQ:OHAI) was in 3 hedge funds' portfolios at the end of September. OHAI shareholders have witnessed a decrease in activity from the world's largest hedge funds recently. There were 4 hedge funds in our database with OHAI positions at the end of the previous quarter. Our calculations also showed that OHAI isn't among the 30 most popular stocks among hedge funds.

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.

[caption id="attachment_193003" align="aligncenter" width="450"] Chuck Royce of Royce & Associates[/caption]

Chuck Royce

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's go over the fresh hedge fund action regarding OHA Investment Corporation (NASDAQ:OHAI).

What have hedge funds been doing with OHA Investment Corporation (NASDAQ:OHAI)?

At the end of the third quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OHAI over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with OHAI Positions

Among these funds, Fondren Management held the most valuable stake in OHA Investment Corporation (NASDAQ:OHAI), which was worth $0.8 million at the end of the third quarter. On the second spot was Almitas Capital which amassed $0.3 million worth of shares. Royce & Associates was 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 Fondren Management allocated the biggest weight to OHA Investment Corporation (NASDAQ:OHAI), around 0.65% of its portfolio. Almitas Capital is also relatively very bullish on the stock, designating 0.37 percent of its 13F equity portfolio to OHAI.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified OHAI as a viable investment and initiated a position in the stock.

Let's now review hedge fund activity in other stocks similar to OHA Investment Corporation (NASDAQ:OHAI). These stocks are Rubicon Technology, Inc. (NASDAQ:RBCN), IRIDEX Corporation (NASDAQ:IRIX), The Peck Company Holdings, Inc. (NASDAQ:PECK), and Image Sensing Systems, Inc. (NASDAQ:ISNS). This group of stocks' market values are closest to OHAI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RBCN,3,4704,0 IRIX,1,813,-1 PECK,1,153,0 ISNS,1,964,0 Average,1.5,1659,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $1 million in OHAI's case. Rubicon Technology, Inc. (NASDAQ:RBCN) is the most popular stock in this table. On the other hand IRIDEX Corporation (NASDAQ:IRIX) is the least popular one with only 1 bullish hedge fund positions. OHA Investment Corporation  (NASDAQ:OHAI) 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately OHAI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on OHAI were disappointed as the stock returned -0.8% during the fourth quarter (through 11/22) 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.

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