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Hedge Funds Are Piling Into Owens Corning (OC)

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Owens Corning (NYSE:OC) and determine whether hedge funds skillfully traded this stock.

Owens Corning (NYSE:OC) shareholders have witnessed an increase in enthusiasm from smart money in recent months. Owens Corning (NYSE:OC) was in 37 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 47. Our calculations also showed that OC isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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 34% through August 17th. 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. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. With all of this in mind we’re going to view the fresh hedge fund action surrounding Owens Corning (NYSE:OC).

How have hedgies been trading Owens Corning (NYSE:OC)?

At the end of the second quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OC over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is OC A Good Stock To Buy?

Among these funds, Citadel Investment Group held the most valuable stake in Owens Corning (NYSE:OC), which was worth $175.9 million at the end of the third quarter. On the second spot was Adage Capital Management which amassed $70.9 million worth of shares. AQR Capital Management, Greenhaven Associates, and Interval Partners 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 Lodge Hill Capital allocated the biggest weight to Owens Corning (NYSE:OC), around 3.48% of its 13F portfolio. Appian Way Asset Management is also relatively very bullish on the stock, earmarking 3.19 percent of its 13F equity portfolio to OC.

Now, key money managers were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, created the most valuable position in Owens Corning (NYSE:OC). Holocene Advisors had $23.8 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also initiated a $15 million position during the quarter. The other funds with new positions in the stock are Steve Cohen’s Point72 Asset Management, D. E. Shaw’s D E Shaw, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Owens Corning (NYSE:OC) but similarly valued. These stocks are Vroom, Inc. (NASDAQ:VRM), ANGI Homeservices Inc (NASDAQ:ANGI), Manhattan Associates, Inc. (NASDAQ:MANH), Canopy Growth Corporation (NYSE:CGC), Post Holdings Inc (NYSE:POST), Five Below Inc (NASDAQ:FIVE), and NovoCure Limited (NASDAQ:NVCR). This group of stocks’ market caps match OC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VRM 28 310338 28
ANGI 48 667972 21
MANH 15 287947 -5
CGC 11 10644 1
POST 34 1240001 3
FIVE 42 988706 11
NVCR 27 384434 0
Average 29.3 555720 8.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.3 hedge funds with bullish positions and the average amount invested in these stocks was $556 million. That figure was $576 million in OC’s case. ANGI Homeservices Inc (NASDAQ:ANGI) is the most popular stock in this table. On the other hand Canopy Growth Corporation (NYSE:CGC) is the least popular one with only 11 bullish hedge fund positions. Owens Corning (NYSE:OC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OC is 68.8. 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. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on OC as the stock returned 21.8% since Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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