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Did Hedge Funds Make The Right Call On OGE Energy Corp. (OGE) ?

The latest 13F reporting period has come and gone, and 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. Now, 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 you are going to find out whether hedge funds thoughtOGE Energy Corp. (NYSE:OGE) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

OGE Energy Corp. (NYSE:OGE) investors should be aware of an increase in enthusiasm from smart money lately. Our calculations also showed that OGE 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.

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Clint Carlson of Carlson Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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. Now let’s take a look at the fresh hedge fund action regarding OGE Energy Corp. (NYSE:OGE).

What does smart money think about OGE Energy Corp. (NYSE:OGE)?

At the end of the first quarter, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in OGE a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies has the biggest position in OGE Energy Corp. (NYSE:OGE), worth close to $61.5 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $29.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that are bullish consist of Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Centenus Global Management allocated the biggest weight to OGE Energy Corp. (NYSE:OGE), around 0.8% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, earmarking 0.76 percent of its 13F equity portfolio to OGE.

Now, some big names were breaking ground themselves. Adage Capital Management, managed by Phill Gross and Robert Atchinson, created the biggest position in OGE Energy Corp. (NYSE:OGE). Adage Capital Management had $29.2 million invested in the company at the end of the quarter. Clint Carlson’s Carlson Capital also initiated a $14.8 million position during the quarter. The other funds with brand new OGE positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Paul Tudor Jones’s Tudor Investment Corp, and Sara Nainzadeh’s Centenus Global Management.

Let’s go over hedge fund activity in other stocks similar to OGE Energy Corp. (NYSE:OGE). These stocks are A. O. Smith Corporation (NYSE:AOS), Ciena Corporation (NYSE:CIEN), Reynolds Consumer Products Inc. (NASDAQ:REYN), and Textron Inc. (NYSE:TXT). This group of stocks’ market valuations match OGE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AOS 25 363596 -1
CIEN 31 301426 -4
REYN 17 267945 17
TXT 22 230265 -8
Average 23.75 290808 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.75 hedge funds with bullish positions and the average amount invested in these stocks was $291 million. That figure was $216 million in OGE’s case. Ciena Corporation (NYSE:CIEN) is the most popular stock in this table. On the other hand Reynolds Consumer Products Inc. (NASDAQ:REYN) is the least popular one with only 17 bullish hedge fund positions. OGE Energy Corp. (NYSE:OGE) 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 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 gained 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately OGE wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); OGE investors were disappointed as the stock returned 8.2% since Q1 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.