Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 5.7% in the 12 months ending October 26 (including dividend payments). Conversely, hedge funds’ 30 preferred S&P 500 stocks (as of June 2014) generated a return of 15.1% during the same 12-month period, with 53% 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' stock picks generate superior risk-adjusted returns. That's why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Owens-Illinois Inc (NYSE:OI).
Is Owens-Illinois Inc (NYSE:OI) a splendid stock to buy now? The smart money is becoming hopeful. The number of long hedge fund bets rose by 1 in recent months. Our calculations also showed that OI isn't among the 30 most popular stocks among hedge funds. OI was in 17 hedge funds' portfolios at the end of September. There were 16 hedge funds in our database with OI positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Alexander Roepers, Atlantic Investment Management
Let's check out the key hedge fund action surrounding Owens-Illinois Inc (NYSE:OI).
What have hedge funds been doing with Owens-Illinois Inc (NYSE:OI)?
At Q3's end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OI over the last 13 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
OI_dec2018
Of the funds tracked by Insider Monkey, First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, holds the largest position in Owens-Illinois Inc (NYSE:OI). First Pacific Advisors LLC has a $183.2 million position in the stock, comprising 1.3% of its 13F portfolio. The second largest stake is held by Alexander Roepers of Atlantic Investment Management, with a $177.4 million position; 29.8% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors that hold long positions contain Israel Englander's Millennium Management, Julian Allen's Spitfire Capital and Steve Cohen's Point72 Asset Management.
Now, key hedge funds have jumped into Owens-Illinois Inc (NYSE:OI) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, initiated the most valuable call position in Owens-Illinois Inc (NYSE:OI). PEAK6 Capital Management had $0.9 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also initiated a $0.6 million position during the quarter. The other funds with brand new OI positions are Roger Ibbotson's Zebra Capital Management, Matthew Hulsizer's PEAK6 Capital Management, and Sander Gerber's Hudson Bay Capital Management.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Owens-Illinois Inc (NYSE:OI) but similarly valued. We will take a look at AllianceBernstein Holding LP (NYSE:AB), Ascendis Pharma A/S (NASDAQ:ASND), EnLink Midstream LLC (NYSE:ENLC), and International Bancshares Corp (NASDAQ:IBOC). This group of stocks' market caps match OI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AB,6,20685,-3 ASND,27,1398630,1 ENLC,13,60370,3 IBOC,16,188481,0 Average,15.5,417042,0.25 [/table]
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $417 million. That figure was $415 million in OI's case. Ascendis Pharma A/S (NASDAQ:ASND) is the most popular stock in this table. On the other hand AllianceBernstein Holding LP (NYSE:AB) is the least popular one with only 6 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. In this regard ASND might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
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