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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Ovintiv Inc. (NYSE:OVV) based on those filings.
Is OVV a good stock to buy now? The best stock pickers were getting more bullish. The number of bullish hedge fund bets went up by 4 in recent months. Ovintiv Inc. (NYSE:OVV) was in 20 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 44. Our calculations also showed that OVV 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 16 hedge funds in our database with OVV holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Andy Redleaf of Whitebox Advisors
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 take a look at the new hedge fund action encompassing Ovintiv Inc. (NYSE:OVV).
Do Hedge Funds Think OVV Is A Good Stock To Buy Now?
At Q3's end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in OVV a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the biggest position in Ovintiv Inc. (NYSE:OVV). Arrowstreet Capital has a $52.2 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $22.4 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish comprise Matt Smith's Deep Basin Capital, Andy Redleaf's Whitebox Advisors and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Deep Basin Capital allocated the biggest weight to Ovintiv Inc. (NYSE:OVV), around 0.6% of its 13F portfolio. Birchview Capital is also relatively very bullish on the stock, dishing out 0.19 percent of its 13F equity portfolio to OVV.
As one would reasonably expect, specific money managers have been driving this bullishness. Winton Capital Management, managed by David Harding, assembled the most outsized position in Ovintiv Inc. (NYSE:OVV). Winton Capital Management had $0.9 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky's Waratah Capital Advisors also initiated a $0.8 million position during the quarter. The following funds were also among the new OVV investors: Parvinder Thiara's Athanor Capital, Israel Englander's Millennium Management, and D. E. Shaw's D E Shaw.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Ovintiv Inc. (NYSE:OVV) but similarly valued. We will take a look at HMS Holdings Corp. (NASDAQ:HMSY), Hillenbrand, Inc. (NYSE:HI), Wolverine World Wide, Inc. (NYSE:WWW), Gibraltar Industries Inc (NASDAQ:ROCK), Telephone & Data Systems, Inc. (NYSE:TDS), The Simply Good Foods Company (NASDAQ:SMPL), and Outfront Media Inc. (REIT) (NYSE:OUT). This group of stocks' market values match OVV's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMSY,26,86934,10 HI,14,93430,2 WWW,17,76062,0 ROCK,19,135252,5 TDS,27,205879,6 SMPL,21,151318,-5 OUT,36,571888,-2 Average,22.9,188680,2.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $189 million. That figure was $86 million in OVV's case. Outfront Media Inc. (REIT) (NYSE:OUT) is the most popular stock in this table. On the other hand Hillenbrand, Inc. (NYSE:HI) is the least popular one with only 14 bullish hedge fund positions. Ovintiv Inc. (NYSE:OVV) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OVV is 36.3. 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 OVV as the stock returned 79.8% 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.