Before we spend days researching a stock idea we like to take a look at how hedge funds and billionaire investors recently traded that stock. Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 10 percentage points since the end of the third quarter of 2018. This means hedge funds that are allocating a higher percentage of their portfolio to small-cap stocks were probably underperforming the market. However, this also means that as small-cap stocks start to mean revert, these hedge funds will start delivering better returns than the S&P 500 Index funds. In this article, we will take a look at what hedge funds think about Owens-Illinois Inc (NYSE:OI).
Is Owens-Illinois Inc (NYSE:OI) an excellent investment today? Money managers are becoming less confident. The number of long hedge fund bets dropped by 2 lately. Our calculations also showed that OI isn't among the 30 most popular stocks among hedge funds (view video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are dozens of gauges shareholders use to size up publicly traded companies. Two of the most innovative gauges are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can trounce the broader indices by a solid amount (see the details here).
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to take a look at the fresh hedge fund action regarding Owens-Illinois Inc (NYSE:OI).
How are hedge funds trading Owens-Illinois Inc (NYSE:OI)?
At Q2's end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in OI a year ago. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Owens-Illinois Inc (NYSE:OI) was held by First Pacific Advisors LLC, which reported holding $173 million worth of stock at the end of March. It was followed by Atlantic Investment Management with a $87.2 million position. Other investors bullish on the company included AQR Capital Management, Millennium Management, and Citadel Investment Group.
Judging by the fact that Owens-Illinois Inc (NYSE:OI) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies that elected to cut their entire stakes by the end of the second quarter. Intriguingly, David Costen Haley's HBK Investments cut the largest investment of the "upper crust" of funds followed by Insider Monkey, comprising an estimated $1.3 million in stock. Michael Platt and William Reeves's fund, BlueCrest Capital Mgmt., also dumped its stock, about $0.8 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 2 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to Owens-Illinois Inc (NYSE:OI). These stocks are Noah Holdings Limited (NYSE:NOAH), Resideo Technologies, Inc. (NYSE:REZI), CNO Financial Group Inc (NYSE:CNO), and Nu Skin Enterprises, Inc. (NYSE:NUS). This group of stocks' market caps are similar to OI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NOAH,12,218313,-2 REZI,29,432922,-3 CNO,14,211942,1 NUS,20,283194,-3 Average,18.75,286593,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $287 million. That figure was $341 million in OI's case. Resideo Technologies, Inc. (NYSE:REZI) is the most popular stock in this table. On the other hand Noah Holdings Limited (NYSE:NOAH) is the least popular one with only 12 bullish hedge fund positions. Owens-Illinois Inc (NYSE:OI) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately OI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on OI were disappointed as the stock returned -40.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.