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While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus talks, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 30,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Omega Healthcare Investors Inc (NYSE:OHI).
Is OHI a good stock to buy now? Investors who are in the know were in a pessimistic mood. The number of bullish hedge fund positions were trimmed by 4 recently. Omega Healthcare Investors Inc (NYSE:OHI) was in 19 hedge funds' portfolios at the end of September. The all time high for this statistic is 23. Our calculations also showed that OHI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 23 hedge funds in our database with OHI positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are tons of methods market participants employ to grade their holdings. A couple of the most innovative methods are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the top hedge fund managers can trounce the market by a superb amount (see the details here).
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to view the recent hedge fund action encompassing Omega Healthcare Investors Inc (NYSE:OHI).
Do Hedge Funds Think OHI Is A Good Stock To Buy Now?
At third quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. By comparison, 18 hedge funds held shares or bullish call options in OHI a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, D. E. Shaw's D E Shaw has the most valuable position in Omega Healthcare Investors Inc (NYSE:OHI), worth close to $37.3 million, corresponding to less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Ken Griffin of Citadel Investment Group, with a $21.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism encompass John Overdeck and David Siegel's Two Sigma Advisors, Eduardo Abush's Waterfront Capital Partners and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Waterfront Capital Partners allocated the biggest weight to Omega Healthcare Investors Inc (NYSE:OHI), around 0.89% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, earmarking 0.15 percent of its 13F equity portfolio to OHI.
Because Omega Healthcare Investors Inc (NYSE:OHI) has witnessed declining sentiment from the entirety of the hedge funds we track, it's easy to see that there were a few hedgies that slashed their full holdings by the end of the third quarter. At the top of the heap, Steve Cohen's Point72 Asset Management dropped the largest position of all the hedgies followed by Insider Monkey, totaling an estimated $2.9 million in stock, and Paul Marshall and Ian Wace's Marshall Wace LLP was right behind this move, as the fund dropped about $2.2 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 4 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to Omega Healthcare Investors Inc (NYSE:OHI). These stocks are Sensata Technologies Holding plc (NYSE:ST), Pan American Silver Corp. (NASDAQ:PAAS), ADT Inc. (NYSE:ADT), Acceleron Pharma Inc (NASDAQ:XLRN), Dunkin Brands Group Inc (NASDAQ:DNKN), LHC Group, Inc. (NASDAQ:LHCG), and AECOM (NYSE:ACM). All of these stocks' market caps are closest to OHI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ST,37,1469542,4 PAAS,28,498359,0 ADT,30,267878,10 XLRN,34,1111306,-14 DNKN,26,246077,-9 LHCG,17,78396,-13 ACM,39,785085,1 Average,30.1,636663,-3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.1 hedge funds with bullish positions and the average amount invested in these stocks was $637 million. That figure was $106 million in OHI's case. AECOM (NYSE:ACM) is the most popular stock in this table. On the other hand LHC Group, Inc. (NASDAQ:LHCG) is the least popular one with only 17 bullish hedge fund positions. Omega Healthcare Investors Inc (NYSE:OHI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OHI is 30.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on OHI as the stock returned 28.1% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.