It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds' consensus stock picks generate superior risk-adjusted returns. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Park-Ohio Holdings Corp. (NASDAQ:PKOH).
Hedge fund interest in Park-Ohio Holdings Corp. (NASDAQ:PKOH) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as SpartanNash Company (NASDAQ:SPTN), Silvercorp Metals Inc. (NYSE:SVM), and Franklin Financial Network Inc (NYSE:FSB) to gather more data points. Our calculations also showed that PKOH isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Today there are a multitude of signals stock traders put to use to evaluate their stock investments. Some of the best signals are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the best money managers can beat the broader indices by a healthy margin (see the details here).
Unlike other investors who track every movement of the 25 largest hedge funds, our long-short investment strategy relies on hedge fund buy/sell signals given by the 100 best performing hedge funds. Let's check out the key hedge fund action encompassing Park-Ohio Holdings Corp. (NASDAQ:PKOH).
Hedge fund activity in Park-Ohio Holdings Corp. (NASDAQ:PKOH)
At the end of the second quarter, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in PKOH a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Park-Ohio Holdings Corp. (NASDAQ:PKOH) was held by GAMCO Investors, which reported holding $24.3 million worth of stock at the end of March. It was followed by Royce & Associates with a $3.4 million position. Other investors bullish on the company included Renaissance Technologies, Millennium Management, and Ancora Advisors.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the second quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Park-Ohio Holdings Corp. (NASDAQ:PKOH) but similarly valued. We will take a look at SpartanNash Company (NASDAQ:SPTN), Silvercorp Metals Inc. (NYSE:SVM), Franklin Financial Network Inc (NYSE:FSB), and Hingham Institution for Savings (NASDAQ:HIFS). All of these stocks' market caps resemble PKOH's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SPTN,20,27535,4 SVM,9,18803,0 FSB,4,11794,0 HIFS,5,6588,4 Average,9.5,16180,2 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $32 million in PKOH's case. SpartanNash Company (NASDAQ:SPTN) is the most popular stock in this table. On the other hand Franklin Financial Network Inc (NYSE:FSB) is the least popular one with only 4 bullish hedge fund positions. Park-Ohio Holdings Corp. (NASDAQ:PKOH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 PKOH wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); PKOH investors were disappointed as the stock returned -8% 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 in 2019.
Disclosure: None. This article was originally published at Insider Monkey.