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 OGE Energy Corp. (NYSE:OGE) and determine whether hedge funds skillfully traded this stock.
OGE Energy Corp. (NYSE:OGE) has experienced an increase in support from the world’s most elite money managers recently. OGE Energy Corp. (NYSE:OGE) was in 25 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 22. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 21 hedge funds in our database with OGE holdings at the end of March. Our calculations also showed that OGE 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.
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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 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. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let’s go over the fresh hedge fund action regarding OGE Energy Corp. (NYSE:OGE).
How have hedgies been trading OGE Energy Corp. (NYSE:OGE)?
Heading into the third quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OGE over the last 20 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the biggest position in OGE Energy Corp. (NYSE:OGE), worth close to $50.3 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is D. E. Shaw of D E Shaw, with a $30.6 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money with similar optimism comprise Ken Griffin’s Citadel Investment Group, Cliff Asness’s AQR Capital Management and Brian Olson, Baehyun Sung, and Jamie Waters’s Blackstart Capital. In terms of the portfolio weights assigned to each position Blackstart Capital allocated the biggest weight to OGE Energy Corp. (NYSE:OGE), around 7.02% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, dishing out 0.21 percent of its 13F equity portfolio to OGE.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Blackstart Capital, managed by Brian Olson, Baehyun Sung, and Jamie Waters, assembled the largest position in OGE Energy Corp. (NYSE:OGE). Blackstart Capital had $10.6 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $2.1 million position during the quarter. The other funds with new positions in the stock are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Benjamin A. Smith’s Laurion Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as OGE Energy Corp. (NYSE:OGE) but similarly valued. These stocks are Syneos Health, Inc. (NASDAQ:SYNH), Athene Holding Ltd. (NYSE:ATH), Elbit Systems Ltd. (NASDAQ:ESLT), Robert Half International Inc. (NYSE:RHI), Reliance Steel & Aluminum Co. (NYSE:RS), Morningstar, Inc. (NASDAQ:MORN), and Aegon N.V. (NYSE:AEG). This group of stocks’ market caps match OGE’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.7 hedge funds with bullish positions and the average amount invested in these stocks was $280 million. That figure was $175 million in OGE’s case. Athene Holding Ltd. (NYSE:ATH) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 4 bullish hedge fund positions. OGE Energy Corp. (NYSE:OGE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OGE is 75.2. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately OGE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on OGE were disappointed as the stock returned -2.2% 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.