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Hedge Funds Have Never Been This Bullish On Bank OZK (OZK)

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Bank OZK (NASDAQ:OZK).

Bank OZK (NASDAQ:OZK) has seen an increase in hedge fund sentiment of late. OZK was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 21 hedge funds in our database with OZK positions at the end of the previous quarter. Our calculations also showed that OZK isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In today’s marketplace there are a large number of methods shareholders can use to evaluate publicly traded companies. A duo of the most innovative methods are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top hedge fund managers can beat the S&P 500 by a very impressive amount (see the details here).

Ric Dillon Diamond Hill Capital

Ric Dillon of Diamond Hill Capital

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s go over the fresh hedge fund action encompassing Bank OZK (NASDAQ:OZK).

What does smart money think about Bank OZK (NASDAQ:OZK)?

At Q4’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OZK over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Ric Dillon’s Diamond Hill Capital has the biggest position in Bank OZK (NASDAQ:OZK), worth close to $163.7 million, corresponding to 0.8% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, holding a $47.6 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money that are bullish comprise Ken Griffin’s Citadel Investment Group, Francois Rochon’s Giverny Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to Bank OZK (NASDAQ:OZK), around 1.41% of its 13F portfolio. Giverny Capital is also relatively very bullish on the stock, earmarking 1.07 percent of its 13F equity portfolio to OZK.

With a general bullishness amongst the heavyweights, key money managers have jumped into Bank OZK (NASDAQ:OZK) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the most outsized position in Bank OZK (NASDAQ:OZK). Marshall Wace LLP had $1.5 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $0.9 million position during the quarter. The other funds with brand new OZK positions are Ray Dalio’s Bridgewater Associates, Philippe Laffont’s Coatue Management, and Cliff Asness’s AQR Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Bank OZK (NASDAQ:OZK). We will take a look at Blackbaud, Inc. (NASDAQ:BLKB), IBERIABANK Corporation (NASDAQ:IBKC), Texas Roadhouse Inc (NASDAQ:TXRH), and Q2 Holdings Inc (NYSE:QTWO). This group of stocks’ market caps are closest to OZK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BLKB 16 102843 2
IBKC 32 234876 10
TXRH 23 238041 -2
QTWO 20 315819 1
Average 22.75 222895 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $223 million. That figure was $276 million in OZK’s case. IBERIABANK Corporation (NASDAQ:IBKC) is the most popular stock in this table. On the other hand Blackbaud, Inc. (NASDAQ:BLKB) is the least popular one with only 16 bullish hedge fund positions. Bank OZK (NASDAQ:OZK) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately OZK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OZK were disappointed as the stock returned -44.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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