Hedge Funds Aren’t Crazy About Ollie’s Bargain Outlet Holdings Inc (OLLI) Anymore

Is Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) a buy, sell, or hold? Hedge funds are taking a pessimistic view. The number of long hedge fund bets were trimmed by 9 recently. Our calculations also showed that OLLI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Philippe Laffont of Coatue Management

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the recent hedge fund action regarding Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI).

How are hedge funds trading Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI)?

At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OLLI over the last 17 quarters. 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, Marshall Wace held the most valuable stake in Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), which was worth $24.8 million at the end of the third quarter. On the second spot was Tower House Partners which amassed $23.5 million worth of shares. PDT Partners, Akre Capital Management, and Millennium Management 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 Tower House Partners allocated the biggest weight to Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI), around 19.55% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.7 percent of its 13F equity portfolio to OLLI.

Since Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) has faced declining sentiment from the smart money, it’s safe to say that there is a sect of hedge funds that elected to cut their full holdings last quarter. Interestingly, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital sold off the biggest investment of the 750 funds monitored by Insider Monkey, totaling about $14.4 million in stock, and Robert Pohly’s Samlyn Capital was right behind this move, as the fund sold off about $14.3 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 9 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI). We will take a look at Spark Therapeutics Inc (NASDAQ:ONCE), Q2 Holdings Inc (NYSE:QTWO), Laureate Education, Inc. (NASDAQ:LAUR), and GrafTech International Ltd. (NYSE:EAF). This group of stocks’ market caps match OLLI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ONCE 36 1272087 -3
QTWO 16 153545 -5
LAUR 25 505326 2
EAF 26 276282 -1
Average 25.75 551810 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $552 million. That figure was $99 million in OLLI’s case. Spark Therapeutics Inc (NASDAQ:ONCE) is the most popular stock in this table. On the other hand Q2 Holdings Inc (NYSE:QTWO) is the least popular one with only 16 bullish hedge fund positions. Ollie’s Bargain Outlet Holdings Inc (NASDAQ:OLLI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on OLLI as the stock returned 11.5% during the first two months of Q4 and outperformed the market by an even larger margin.

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