Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Otter Tail Corporation (NASDAQ:OTTR).
Otter Tail Corporation (NASDAQ:OTTR) investors should be aware of a decrease in activity from the world's largest hedge funds recently. OTTR was in 10 hedge funds' portfolios at the end of the first quarter of 2019. There were 12 hedge funds in our database with OTTR positions at the end of the previous quarter. Our calculations also showed that OTTR 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 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let's take a look at the recent hedge fund action encompassing Otter Tail Corporation (NASDAQ:OTTR).
Hedge fund activity in Otter Tail Corporation (NASDAQ:OTTR)
At the end of the first quarter, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OTTR over the last 15 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Otter Tail Corporation (NASDAQ:OTTR), with a stake worth $47 million reported as of the end of March. Trailing Renaissance Technologies was GAMCO Investors, which amassed a stake valued at $17.9 million. Shelter Harbor Advisors, Blue Mountain Capital, and Zebra Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Otter Tail Corporation (NASDAQ:OTTR) has experienced falling interest from hedge fund managers, we can see that there exists a select few money managers who sold off their entire stakes in the third quarter. Intriguingly, David Harding's Winton Capital Management dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling about $0.4 million in stock. Brandon Haley's fund, Holocene Advisors, also cut its stock, about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks similar to Otter Tail Corporation (NASDAQ:OTTR). These stocks are Alamos Gold Inc (NYSE:AGI), United Community Banks Inc (NASDAQ:UCBI), Sanmina Corporation (NASDAQ:SANM), and G-III Apparel Group, Ltd. (NASDAQ:GIII). This group of stocks' market valuations match OTTR's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGI,12,136451,1 UCBI,15,54356,1 SANM,18,208755,3 GIII,18,150459,5 Average,15.75,137505,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.75 hedge funds with bullish positions and the average amount invested in these stocks was $138 million. That figure was $72 million in OTTR's case. Sanmina Corporation (NASDAQ:SANM) is the most popular stock in this table. On the other hand Alamos Gold Inc (NYSE:AGI) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Otter Tail Corporation (NASDAQ:OTTR) is even less popular than AGI. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on OTTR, though not to the same extent, as the stock returned 6% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.