At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards O-I Glass, Inc. (NYSE:OI) at the end of the first quarter and determine whether the smart money was really smart about this stock.
Is O-I Glass, Inc. (NYSE:OI) the right pick for your portfolio? Investors who are in the know were taking an optimistic view. The number of bullish hedge fund positions increased by 9 lately. Our calculations also showed that OI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). OI was in 29 hedge funds’ portfolios at the end of March. There were 20 hedge funds in our database with OI holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Abrams of Abrams Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a look at the new hedge fund action regarding O-I Glass, Inc. (NYSE:OI).
What does smart money think about O-I Glass, Inc. (NYSE:OI)?
Heading into the second quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of 45% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in OI a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Abrams Capital Management, managed by David Abrams, holds the most valuable position in O-I Glass, Inc. (NYSE:OI). Abrams Capital Management has a $49.3 million position in the stock, comprising 1.9% of its 13F portfolio. The second most bullish fund manager is Alexander Roepers of Atlantic Investment Management, with a $46.2 million position; 26% of its 13F portfolio is allocated to the company. Other professional money managers that hold long positions comprise Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, Andrew Wellington and Jeff Keswin’s Lyrical Asset Management and Stephen Mildenhall’s Contrarius Investment Management. In terms of the portfolio weights assigned to each position Atlantic Investment Management allocated the biggest weight to O-I Glass, Inc. (NYSE:OI), around 26.05% of its 13F portfolio. Contrarius Investment Management is also relatively very bullish on the stock, setting aside 2.75 percent of its 13F equity portfolio to OI.
As one would reasonably expect, key money managers have jumped into O-I Glass, Inc. (NYSE:OI) headfirst. Lodge Hill Capital, managed by Clint Murray, initiated the most valuable position in O-I Glass, Inc. (NYSE:OI). Lodge Hill Capital had $3.1 million invested in the company at the end of the quarter. Yi Xin’s Ariose Capital also made a $2.1 million investment in the stock during the quarter. The following funds were also among the new OI investors: Benjamin A. Smith’s Laurion Capital Management, Cliff Asness’s AQR Capital Management, and Franklin Parlamis’s Aequim Alternative Investments.
Let’s now review hedge fund activity in other stocks similar to O-I Glass, Inc. (NYSE:OI). We will take a look at Axos Financial, Inc. (NYSE:AX), Heartland Financial USA Inc (NASDAQ:HTLF), James River Group Holdings Ltd (NASDAQ:JRVR), and Aurora Cannabis Inc. (NASDAQ:ACB). This group of stocks’ market values resemble OI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AX | 12 | 43447 | -3 |
| HTLF | 6 | 6048 | -2 |
| JRVR | 13 | 72712 | 3 |
| ACB | 9 | 12761 | -3 |
| Average | 10 | 33742 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $255 million in OI’s case. James River Group Holdings Ltd (NASDAQ:JRVR) is the most popular stock in this table. On the other hand Heartland Financial USA Inc (NASDAQ:HTLF) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks O-I Glass, Inc. (NYSE:OI) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on OI as the stock returned 26.3% in Q2 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
