Hedge Funds Are Crazy About Bank OZK (OZK)

Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). 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 Bank OZK (NASDAQ:OZK).

Bank OZK (NASDAQ:OZK) shareholders have witnessed an increase in support from the world’s most elite money managers lately. Bank OZK (NASDAQ:OZK) was in 25 hedge funds’ portfolios at the end of March. The all time high for this statistic is 25. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 20 hedge funds in our database with OZK holdings at the end of December. Our calculations also showed that OZK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Ian Wace Marshall Wace

Ian Wace of Marshall Wace

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a glance at the new hedge fund action regarding Bank OZK (NASDAQ:OZK).

Do Hedge Funds Think OZK Is A Good Stock To Buy Now?

At first quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from one quarter earlier. On the other hand, there were a total of 25 hedge funds with a bullish position in OZK 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.

Among these funds, Diamond Hill Capital held the most valuable stake in Bank OZK (NASDAQ:OZK), which was worth $146.5 million at the end of the fourth quarter. On the second spot was Driehaus Capital which amassed $17 million worth of shares. Millennium Management, Citadel Investment Group, and Renaissance Technologies 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 Global Frontier Investments allocated the biggest weight to Bank OZK (NASDAQ:OZK), around 4.4% of its 13F portfolio. Diamond Hill Capital is also relatively very bullish on the stock, designating 0.59 percent of its 13F equity portfolio to OZK.

With a general bullishness amongst the heavyweights, some big names have jumped into Bank OZK (NASDAQ:OZK) headfirst. PDT Partners, managed by Peter Muller, created the biggest position in Bank OZK (NASDAQ:OZK). PDT Partners had $0.6 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Greg Eisner’s Engineers Gate Manager, Karim Abbadi and Edward McBride’s Centiva Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now review hedge fund activity in other stocks similar to Bank OZK (NASDAQ:OZK). We will take a look at Kemper Corporation (NYSE:KMPR), Oscar Health, Inc. (NYSE:OSCR), EQT Corporation (NYSE:EQT), Chart Industries, Inc. (NYSE:GTLS), CMC Materials, Inc. (NASDAQ:CCMP), CoreSite Realty Corp (NYSE:COR), and The Descartes Systems Group Inc (NASDAQ:DSGX). This group of stocks’ market values resemble OZK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KMPR 11 43239 -2
OSCR 26 1337245 26
EQT 35 437253 -8
GTLS 19 297275 -7
CCMP 19 281932 -3
COR 15 173361 1
DSGX 11 274653 -1
Average 19.4 406423 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $406 million. That figure was $237 million in OZK’s case. EQT Corporation (NYSE:EQT) is the most popular stock in this table. On the other hand Kemper Corporation (NYSE:KMPR) is the least popular one with only 11 bullish hedge fund positions. Bank OZK (NASDAQ:OZK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OZK is 69.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately OZK wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on OZK were disappointed as the stock returned 5.6% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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