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Is OSW A Good Stock To Buy Now?

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Debasis Saha
·6 min read
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In this article we will analyze whether OneSpaWorld Holdings Limited (NASDAQ:OSW) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is OSW a good stock to buy now? OneSpaWorld Holdings Limited (NASDAQ:OSW) investors should pay attention to a decrease in support from the world's most elite money managers of late. OneSpaWorld Holdings Limited (NASDAQ:OSW) was in 10 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 15. Our calculations also showed that OSW 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding
David Harding

David Harding of Winton Capital Management

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 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. With all of this in mind we're going to take a look at the new hedge fund action surrounding OneSpaWorld Holdings Limited (NASDAQ:OSW).

Do Hedge Funds Think OSW Is A Good Stock To Buy Now?

At third quarter's end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from the second quarter of 2020. On the other hand, there were a total of 8 hedge funds with a bullish position in OSW a year ago. With the smart money's sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

Is OSW A Good Stock To Buy?
Is OSW A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ariel Investments, managed by John W. Rogers, holds the most valuable position in OneSpaWorld Holdings Limited (NASDAQ:OSW). Ariel Investments has a $39.7 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish fund manager is Deep Field Asset Management, managed by Jordan Moelis and Jeff Farroni, which holds a $12.4 million position; the fund has 7.8% of its 13F portfolio invested in the stock. Other professional money managers that are bullish comprise Kris Jenner, Gordon Bussard, Graham McPhail's Rock Springs Capital Management, D. E. Shaw's D E Shaw and David Harding's Winton Capital Management. In terms of the portfolio weights assigned to each position Deep Field Asset Management allocated the biggest weight to OneSpaWorld Holdings Limited (NASDAQ:OSW), around 7.77% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 0.58 percent of its 13F equity portfolio to OSW.

Since OneSpaWorld Holdings Limited (NASDAQ:OSW) has faced bearish sentiment from the smart money, it's safe to say that there was a specific group of money managers that slashed their full holdings in the third quarter. At the top of the heap, Angela Aldrich's Bayberry Capital Partners dropped the biggest investment of all the hedgies watched by Insider Monkey, totaling close to $5 million in stock, and Israel Englander's Millennium Management was right behind this move, as the fund said goodbye to about $1.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds in the third quarter.

Let's check out hedge fund activity in other stocks similar to OneSpaWorld Holdings Limited (NASDAQ:OSW). We will take a look at Green Plains Inc. (NASDAQ:GPRE), Genesis Energy, L.P. (NYSE:GEL), The York Water Company (NASDAQ:YORW), Adecoagro SA (NYSE:AGRO), The Chefs Warehouse, Inc (NASDAQ:CHEF), Fluidigm Corporation (NASDAQ:FLDM), and Poseida Therapeutics, Inc. (NASDAQ:PSTX). This group of stocks' market valuations match OSW's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPRE,17,156646,-3 GEL,3,6208,-1 YORW,9,16014,1 AGRO,10,141512,-3 CHEF,19,86707,5 FLDM,27,152829,7 PSTX,12,69861,12 Average,13.9,89968,2.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.9 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $67 million in OSW's case. Fluidigm Corporation (NASDAQ:FLDM) is the most popular stock in this table. On the other hand Genesis Energy, L.P. (NYSE:GEL) is the least popular one with only 3 bullish hedge fund positions. OneSpaWorld Holdings Limited (NASDAQ:OSW) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OSW is 35.6. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on OSW as the stock returned 36.9% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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Disclosure: None. This article was originally published at Insider Monkey.

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