Hedge Funds Are Crazy About Omega Healthcare Investors Inc (OHI)

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the fourth quarter. Among them, Amazon and Netflix ranked among the top 30 picks and both lost around 20%. Facebook, which was the second most popular stock, lost 14% amid uncertainty regarding the interest rates and tech valuations. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Omega Healthcare Investors Inc (NYSE:OHI) has seen an increase in hedge fund sentiment in recent months. OHI was in 12 hedge funds’ portfolios at the end of September. There were 10 hedge funds in our database with OHI holdings at the end of the previous quarter. Our calculations also showed that ohi isn’t among the 30 most popular stocks among hedge funds.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

Let’s take a peek at the fresh hedge fund action encompassing Omega Healthcare Investors Inc (NYSE:OHI).

How have hedgies been trading Omega Healthcare Investors Inc (NYSE:OHI)?

Heading into the fourth quarter of 2018, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 20% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards OHI over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with OHI Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the biggest position in Omega Healthcare Investors Inc (NYSE:OHI). Renaissance Technologies has a $18.9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by PEAK6 Capital Management, led by Matthew Hulsizer, holding a $9.3 million call position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers that are bullish include John Overdeck and David Siegel’s Two Sigma Advisors, and Eduardo Abush’s Waterfront Capital Partners.

As one would reasonably expect, specific money managers were leading the bulls’ herd. Renaissance Technologies, managed by Jim Simons, established the most valuable position in Omega Healthcare Investors Inc (NYSE:OHI). Renaissance Technologies had $18.9 million invested in the company at the end of the quarter. Eduardo Abush’s Waterfront Capital Partners also initiated a $5.5 million position during the quarter. The other funds with brand new OHI positions are Richard Driehaus’s Driehaus Capital, D. E. Shaw’s D E Shaw, and Jeffrey Pierce’s Snow Park Capital Partners.

Let’s go over hedge fund activity in other stocks similar to Omega Healthcare Investors Inc (NYSE:OHI). We will take a look at Western Gas Equity Partners LP (NYSE:WGP), EnLink Midstream Partners LP (NYSE:ENLK), Post Holdings Inc (NYSE:POST), and Sinopec Shanghai Petrochemical Company Limited (NYSE:SHI). All of these stocks’ market caps resemble OHI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WGP 5 60856 1
ENLK 4 12285 -1
POST 29 1593536 7
SHI 6 15803 2
Average 11 420620 2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $421 million. That figure was $42 million in OHI’s case. Post Holdings Inc (NYSE:POST) is the most popular stock in this table. On the other hand EnLink Midstream Partners LP (NYSE:ENLK) is the least popular one with only 4 bullish hedge fund positions. Omega Healthcare Investors Inc (NYSE:OHI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard POST might be a better candidate to consider a long position.

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