Hedge Funds Have Never Been This Bullish On Olin Corporation (OLN)

In this article we are going to use hedge fund sentiment as a tool and determine whether Olin Corporation (NYSE:OLN) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Olin Corporation (NYSE:OLN) a good investment now? The smart money was betting on the stock. The number of bullish hedge fund bets increased by 3 in recent months. Olin Corporation (NYSE:OLN) was in 37 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OLN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 34 hedge funds in our database with OLN holdings at the end of March.

To most investors, hedge funds are seen as slow, old financial tools of the past. While there are over 8000 funds with their doors open at the moment, Our experts look at the bigwigs of this group, about 850 funds. It is estimated that this group of investors administer the lion’s share of all hedge funds’ total asset base, and by shadowing their matchless equity investments, Insider Monkey has spotted a number of investment strategies that have historically exceeded the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Scott Ferguson Sachem Head Capital

Scott Ferguson of Sachem Head Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks 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. Now we’re going to go over the new hedge fund action encompassing Olin Corporation (NYSE:OLN).

Do Hedge Funds Think OLN Is A Good Stock To Buy Now?

At the end of June, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OLN over the last 24 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Among these funds, Sachem Head Capital held the most valuable stake in Olin Corporation (NYSE:OLN), which was worth $691.6 million at the end of the second quarter. On the second spot was Pzena Investment Management which amassed $184.8 million worth of shares. East Side Capital (RR Partners), Adage Capital Management, 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 Sachem Head Capital allocated the biggest weight to Olin Corporation (NYSE:OLN), around 17.91% of its 13F portfolio. East Side Capital (RR Partners) is also relatively very bullish on the stock, earmarking 16.64 percent of its 13F equity portfolio to OLN.

As one would reasonably expect, key money managers were breaking ground themselves. Renaissance Technologies, assembled the largest position in Olin Corporation (NYSE:OLN). Renaissance Technologies had $12.7 million invested in the company at the end of the quarter. Robert Bishop’s Impala Asset Management also made a $12.1 million investment in the stock during the quarter. The following funds were also among the new OLN investors: Michael Cowley’s Sandbar Asset Management, Mark Lee’s Mountaineer Partners Management, and Vince Maddi and Shawn Brennan’s SIR Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Olin Corporation (NYSE:OLN) but similarly valued. These stocks are Upwork Inc. (NASDAQ:UPWK), IAA, Inc. (NYSE:IAA), Gildan Activewear Inc (NYSE:GIL), The New York Times Company (NYSE:NYT), The AZEK Company Inc. (NYSE:AZEK), Woori Financial Group Inc. (NYSE:WF), and People’s United Financial, Inc. (NASDAQ:PBCT). All of these stocks’ market caps match OLN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UPWK 26 427800 -6
IAA 33 829694 -2
GIL 19 726018 2
NYT 48 2224644 0
AZEK 37 407782 8
WF 2 3694 0
PBCT 24 219174 4
Average 27 691258 0.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $691 million. That figure was $1326 million in OLN’s case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. Olin Corporation (NYSE:OLN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OLN is 76. 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 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on OLN as the stock returned 8.2% since the end of Q2 (through 10/11) 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.