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Did Hedge Funds Make The Right Call On Oceaneering International, Inc. (OII) ?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Oceaneering International, Inc. (NYSE:OII) and determine whether the smart money was really smart about this stock.

Oceaneering International, Inc. (NYSE:OII) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. OII was in 19 hedge funds’ portfolios at the end of March. There were 24 hedge funds in our database with OII positions at the end of the previous quarter. Our calculations also showed that OII 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

At the moment there are numerous formulas investors employ to size up their holdings. Some of the most underrated formulas are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the top investment managers can beat the S&P 500 by a significant margin (see the details here).

Lee Ainslie MAVERICK CAPITAL

Lee Ainslie of Maverick Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s take a look at the new hedge fund action encompassing Oceaneering International, Inc. (NYSE:OII).

Hedge fund activity in Oceaneering International, Inc. (NYSE:OII)

At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OII over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in Oceaneering International, Inc. (NYSE:OII), which was worth $7.7 million at the end of the third quarter. On the second spot was D E Shaw which amassed $7.5 million worth of shares. Balyasny Asset Management, Citadel Investment Group, and PDT Partners 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 PDT Partners allocated the biggest weight to Oceaneering International, Inc. (NYSE:OII), around 0.11% of its 13F portfolio. Balyasny Asset Management is also relatively very bullish on the stock, setting aside 0.05 percent of its 13F equity portfolio to OII.

Seeing as Oceaneering International, Inc. (NYSE:OII) has faced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that slashed their full holdings by the end of the first quarter. It’s worth mentioning that Vince Maddi and Shawn Brennan’s SIR Capital Management dropped the largest investment of the 750 funds tracked by Insider Monkey, totaling about $3.2 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund dumped about $1 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 5 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Oceaneering International, Inc. (NYSE:OII) but similarly valued. These stocks are Clarus Corporation (NASDAQ:CLAR), Financial Institutions, Inc. (NASDAQ:FISI), Craft Brew Alliance Inc (NASDAQ:BREW), and Alerus Financial Corporation (NASDAQ:ALRS). This group of stocks’ market valuations match OII’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLAR 11 34032 0
FISI 11 23795 0
BREW 11 14971 4
ALRS 1 231 -1
Average 8.5 18257 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.5 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $30 million in OII’s case. Clarus Corporation (NASDAQ:CLAR) is the most popular stock in this table. On the other hand Alerus Financial Corporation (NASDAQ:ALRS) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Oceaneering International, Inc. (NYSE:OII) 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 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on OII as the stock returned 103.4% since Q1 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.