Do Hedge Funds Love Ollie’s Bargain Outlet Holdings Inc (OLLI)?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 5.2% in the 12 month-period that ended October 30, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular S&P 500 stocks among the hedge fund investors tracked by the Insider Monkey team returned 9.5% over the same period, which provides evidence that these money managers do have great stock picking abilities. Even more to that, 63% of these stocks managed to beat the S&P 500 Index. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI).

Ollie’s Bargain Outlet Holdings’ stock started trading in July and 10 funds from our database initiated stakes in the company between the IPO and the end of September. At the end of this article we will also compare OLLI to other stocks including A. Schulman Inc (NASDAQ:SHLM), Engility Holdings Inc (NYSE:EGL), and Merrimack Pharmaceuticals Inc (NASDAQ:MACK) to get a better sense of its popularity.

Follow Ollie's Bargain Outlet Holdings Inc. (NASDAQ:OLLI)

If you’d ask most market participants, hedge funds are viewed as slow, old investment tools of yesteryear. While there are over 8000 funds trading today, We look at the moguls of this group, approximately 700 funds. These hedge fund managers shepherd most of the hedge fund industry’s total asset base, and by following their first-class stock picks, Insider Monkey has deciphered a few investment strategies that have historically surpassed the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, let’s go over the fresh action surrounding Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI).

What have hedge funds been doing with Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI)?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Tide Point Capital, managed by Christopher A. Winham, initiated the largest stake in Ollie’s Bargain Outlet Holdings, which was valued at $10.7 million at the end of September, comprising 1.3% of its 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $5.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors with similar optimism comprise Ken Griffin’s Citadel Investment Group, Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors, and Anand Parekh’s Alyeska Investment Group.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) but similarly valued. We will take a look at A. Schulman Inc (NASDAQ:SHLM), Engility Holdings Inc (NYSE:EGL), Merrimack Pharmaceuticals Inc (NASDAQ:MACK), and Videocon d2h Ltd – ADR (NASDAQ:VDTH). All of these stocks’ market caps resemble OLLI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SHLM 18 83987 5
EGL 12 34808 3
MACK 10 15406 -3
VDTH 19 144936 -2

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. In OLLI, the funds reported stakes worth in aggregate $26 million. Videocon d2h Ltd – ADR (NASDAQ:VDTH) is the most popular stock in this table, while Merrimack Pharmaceuticals Inc (NASDAQ:MACK) is the least popular one with only 10 bullish hedge fund positions, the same number in Ollie’s Bargain Outlet Holdings’ case. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news, assuming that the stock has recently started trading and still has the chance to win the confidence of more investors.