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Overstock.com, Inc. (OSTK): Hedge Funds Are Cashing Out

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As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Overstock.com, Inc. (NASDAQ:OSTK).

Overstock.com, Inc. (NASDAQ:OSTK) investors should be aware of a decrease in hedge fund sentiment lately. Overstock.com, Inc. (NASDAQ:OSTK) was in 28 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that OSTK isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Today there are dozens of signals investors employ to value publicly traded companies. Some of the best signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outpace the market by a significant margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Chuck Royce
Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now let's take a look at the fresh hedge fund action regarding Overstock.com, Inc. (NASDAQ:OSTK).

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

Heading into the third quarter of 2021, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in OSTK 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.

Is OSTK A Good Stock To Buy?
Is OSTK A Good Stock To Buy?

More specifically, D E Shaw was the largest shareholder of Overstock.com, Inc. (NASDAQ:OSTK), with a stake worth $48.2 million reported as of the end of June. Trailing D E Shaw was Balyasny Asset Management, which amassed a stake valued at $28.3 million. No Street Capital, Portolan Capital Management, and Contrarius Investment 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 Diker Management allocated the biggest weight to Overstock.com, Inc. (NASDAQ:OSTK), around 5.46% of its 13F portfolio. No Street Capital is also relatively very bullish on the stock, dishing out 4.34 percent of its 13F equity portfolio to OSTK.

Since Overstock.com, Inc. (NASDAQ:OSTK) has witnessed a decline in interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of funds who were dropping their positions entirely by the end of the second quarter. At the top of the heap, Peter S. Park's Park West Asset Management sold off the largest investment of the 750 funds tracked by Insider Monkey, totaling close to $19.9 million in stock. Renaissance Technologies, also said goodbye to its stock, about $13.6 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the second quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Overstock.com, Inc. (NASDAQ:OSTK) but similarly valued. We will take a look at ACV Auctions Inc. (NASDAQ:ACVA), Cohen & Steers, Inc. (NYSE:CNS), Jamf Holding Corp. (NASDAQ:JAMF), loanDepot, Inc. (NYSE:LDI), SeaWorld Entertainment Inc (NYSE:SEAS), ONE Gas Inc (NYSE:OGS), and WNS (Holdings) Limited (NYSE:WNS). This group of stocks' market values are closest to OSTK's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACVA,22,104991,-3 CNS,14,86459,-3 JAMF,19,2291473,2 LDI,4,7004,-2 SEAS,41,1948325,2 OGS,13,31848,0 WNS,20,294371,-1 Average,19,680639,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $681 million. That figure was $256 million in OSTK's case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand loanDepot, Inc. (NYSE:LDI) is the least popular one with only 4 bullish hedge fund positions. Overstock.com, Inc. (NASDAQ:OSTK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OSTK is 61.5. 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. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately OSTK wasn't nearly as popular as these 5 stocks and hedge funds that were betting on OSTK were disappointed as the stock returned -15.8% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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