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Hedge Funds Are Nibbling On OFG Bancorp (OFG)

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 OFG Bancorp (NYSE:OFG) and determine whether the smart money was really smart about this stock.

OFG Bancorp (NYSE:OFG) investors should be aware of an increase in hedge fund sentiment of late. Our calculations also showed that OFG 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a gander at the new hedge fund action encompassing OFG Bancorp (NYSE:OFG).

Hedge fund activity in OFG Bancorp (NYSE:OFG)

Heading into the second quarter of 2020, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in OFG a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

More specifically, Renaissance Technologies was the largest shareholder of OFG Bancorp (NYSE:OFG), with a stake worth $5 million reported as of the end of September. Trailing Renaissance Technologies was Polaris Capital Management, which amassed a stake valued at $2.4 million. Millennium Management, AQR Capital Management, and D E Shaw 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 Polaris Capital Management allocated the biggest weight to OFG Bancorp (NYSE:OFG), around 0.15% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to OFG.

With a general bullishness amongst the heavyweights, specific money managers have jumped into OFG Bancorp (NYSE:OFG) headfirst. Citadel Investment Group, managed by Ken Griffin, established the most outsized position in OFG Bancorp (NYSE:OFG). Citadel Investment Group had $0.5 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $0.4 million investment in the stock during the quarter. The other funds with brand new OFG positions are Benjamin A. Smith’s Laurion Capital Management and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s go over hedge fund activity in other stocks similar to OFG Bancorp (NYSE:OFG). We will take a look at Archrock, Inc. (NYSE:AROC), Blucora Inc (NASDAQ:BCOR), Genfit SA (NASDAQ:GNFT), and Great Southern Bancorp, Inc. (NASDAQ:GSBC). All of these stocks’ market caps match OFG’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AROC 11 13967 -4
BCOR 19 66622 6
GNFT 2 4694 0
GSBC 12 29827 3
Average 11 28778 1.25

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 $29 million. That figure was $16 million in OFG’s case. Blucora Inc (NASDAQ:BCOR) is the most popular stock in this table. On the other hand Genfit SA (NASDAQ:GNFT) is the least popular one with only 2 bullish hedge fund positions. OFG Bancorp (NYSE:OFG) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on OFG, though not to the same extent, as the stock returned 20.3% during the second quarter and outperformed the market as well.

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