While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Omega Healthcare Investors Inc (NYSE:OHI).
Is Omega Healthcare Investors Inc (NYSE:OHI) a great investment right now? Hedge funds were in a bearish mood. The number of long hedge fund bets fell by 5 recently. Omega Healthcare Investors Inc (NYSE:OHI) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistic is 25. Our calculations also showed that OHI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, plant based food market is expected to explode 100-fold by 2050, so we are checking out this under-the-radar stock. We go through lists like the 10 best growth stocks to buy 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 peek at the key hedge fund action regarding Omega Healthcare Investors Inc (NYSE:OHI).
Do Hedge Funds Think OHI Is A Good Stock To Buy Now?
At the end of June, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in OHI a year ago. With hedge funds’ capital changing hands, there exists a few notable hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
More specifically, D E Shaw was the largest shareholder of Omega Healthcare Investors Inc (NYSE:OHI), with a stake worth $83.1 million reported as of the end of June. Trailing D E Shaw was AQR Capital Management, which amassed a stake valued at $14 million. Two Sigma Advisors, Marshall Wace LLP, and Citadel Investment Group 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 LDR Capital allocated the biggest weight to Omega Healthcare Investors Inc (NYSE:OHI), around 0.32% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, designating 0.13 percent of its 13F equity portfolio to OHI.
Since Omega Healthcare Investors Inc (NYSE:OHI) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few hedgies that elected to cut their entire stakes in the second quarter. It’s worth mentioning that Israel Englander’s Millennium Management sold off the largest position of all the hedgies watched by Insider Monkey, valued at close to $21.5 million in stock. Renaissance Technologies, also said goodbye to its stock, about $17 million worth. These moves are interesting, as total hedge fund interest dropped by 5 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks similar to Omega Healthcare Investors Inc (NYSE:OHI). These stocks are US Foods Holding Corp. (NYSE:USFD), Genpact Limited (NYSE:G), TFI International Inc. (NYSE:TFII), Under Armour Inc (NYSE:UA), Huntington Ingalls Industries Inc (NYSE:HII), Jefferies Financial Group Inc. (NYSE:JEF), and Advanced Drainage Systems Inc. (NYSE:WMS). 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 |
|---|---|---|---|
| USFD | 35 | 1399474 | -5 |
| G | 22 | 234361 | -1 |
| TFII | 13 | 101129 | -6 |
| UA | 51 | 1786550 | 0 |
| HII | 21 | 153435 | 1 |
| JEF | 29 | 698210 | -9 |
| WMS | 26 | 1337049 | -3 |
| Average | 28.1 | 815744 | -3.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $816 million. That figure was $143 million in OHI’s case. Under Armour Inc (NYSE:UA) is the most popular stock in this table. On the other hand TFI International Inc. (NYSE:TFII) is the least popular one with only 13 bullish hedge fund positions. Omega Healthcare Investors Inc (NYSE:OHI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OHI is 33.2. 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 negative signal and 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 October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately OHI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); OHI investors were disappointed as the stock returned -14.3% since the end of June (through 10/22) 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 most of these stocks already outperformed the market in 2021.
Follow Omega Healthcare Investors Inc (NYSE:OHI)
Follow Omega Healthcare Investors Inc (NYSE:OHI)
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Disclosure: None. This article was originally published at Insider Monkey.
