We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Owens Corning (NYSE:OC).
Is OC stock a buy or sell? Investors who are in the know were taking a pessimistic view. The number of bullish hedge fund bets went down by 5 lately. Owens Corning (NYSE:OC) was in 38 hedge funds’ portfolios at the end of December. The all time high for this statistic is 47. Our calculations also showed that OC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 43 hedge funds in our database with OC positions at the end of the third quarter.
In the financial world there are plenty of tools stock traders can use to grade publicly traded companies. Some of the less known tools are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite fund managers can beat their index-focused peers by a superb amount (see the details here).
Noam Gottesman of GLG Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. Now let’s review the key hedge fund action encompassing Owens Corning (NYSE:OC).
Do Hedge Funds Think OC Is A Good Stock To Buy Now?
At Q4’s end, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the third quarter of 2020. By comparison, 47 hedge funds held shares or bullish call options in OC a year ago. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of Owens Corning (NYSE:OC), with a stake worth $47.1 million reported as of the end of December. Trailing Citadel Investment Group was GLG Partners, which amassed a stake valued at $39.3 million. Greenhaven Associates, Shellback Capital, and Arrowstreet Capital 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 Lodge Hill Capital allocated the biggest weight to Owens Corning (NYSE:OC), around 4.14% of its 13F portfolio. Discovery Capital Management is also relatively very bullish on the stock, earmarking 2.64 percent of its 13F equity portfolio to OC.
Due to the fact that Owens Corning (NYSE:OC) has witnessed declining sentiment from the entirety of the hedge funds we track, we can see that there was a specific group of money managers who sold off their entire stakes last quarter. Interestingly, Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the biggest position of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $82 million in stock, and Jack Woodruff’s Candlestick Capital Management was right behind this move, as the fund dumped about $20.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Owens Corning (NYSE:OC) but similarly valued. We will take a look at Gold Fields Limited (NYSE:GFI), Ciena Corporation (NYSE:CIEN), Vedanta Ltd (NYSE:VEDL), Alteryx, Inc. (NYSE:AYX), Adaptive Biotechnologies Corporation (NASDAQ:ADPT), Deckers Outdoor Corp (NYSE:DECK), and PRA Health Sciences Inc (NASDAQ:PRAH). This group of stocks’ market values match OC’s market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GFI,15,367925,0 CIEN,24,313610,-5 VEDL,10,68919,1 AYX,42,1458411,1 ADPT,30,3096715,4 DECK,45,1300910,-9 PRAH,23,214759,-1 Average,27,974464,-1.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $974 million. That figure was $378 million in OC’s case. Deckers Outdoor Corp (NYSE:DECK) is the most popular stock in this table. On the other hand Vedanta Ltd (NYSE:VEDL) is the least popular one with only 10 bullish hedge fund positions. Owens Corning (NYSE:OC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OC is 64.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on OC as the stock returned 20.8% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Get real-time email alerts: Follow Owens Corning (NYSE:OC)
Disclosure: None. This article was originally published at Insider Monkey.