Hedge Funds Have Never Been This Bullish On Overstock.com, Inc. (OSTK)

In this article we will take a look at whether hedge funds think Overstock.com, Inc. (NASDAQ:OSTK) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Overstock.com, Inc. (NASDAQ:OSTK) worth your attention right now? The smart money was buying. The number of long hedge fund positions moved up by 7 lately. Overstock.com, Inc. (NASDAQ:OSTK) was in 31 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 24. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OSTK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 24 hedge funds in our database with OSTK positions at the end of the fourth quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Keeping this in mind let’s take a gander at the key hedge fund action surrounding Overstock.com, Inc. (NASDAQ:OSTK).

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

At Q1’s end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in OSTK over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Park West Asset Management was the largest shareholder of Overstock.com, Inc. (NASDAQ:OSTK), with a stake worth $19.9 million reported as of the end of March. Trailing Park West Asset Management was Citadel Investment Group, which amassed a stake valued at $19.5 million. Balyasny Asset Management, No Street Capital, and Renaissance Technologies 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 No Street Capital allocated the biggest weight to Overstock.com, Inc. (NASDAQ:OSTK), around 2.01% of its 13F portfolio. Diker Management is also relatively very bullish on the stock, setting aside 1.61 percent of its 13F equity portfolio to OSTK.

Now, specific money managers have been driving this bullishness. Park West Asset Management, managed by Peter S. Park, created the biggest position in Overstock.com, Inc. (NASDAQ:OSTK). Park West Asset Management had $19.9 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $18.5 million investment in the stock during the quarter. The following funds were also among the new OSTK investors: Jeff Osher’s No Street Capital, Mark N. Diker’s Diker Management, and Ken Grossman and Glen Schneider’s SG Capital Management.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Overstock.com, Inc. (NASDAQ:OSTK) but similarly valued. We will take a look at National Storage Affiliates Trust (NYSE:NSA), Dycom Industries, Inc. (NYSE:DY), California Water Service Group (NYSE:CWT), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), ESCO Technologies Inc. (NYSE:ESE), PJT Partners Inc (NYSE:PJT), and 2U Inc (NASDAQ:TWOU). All of these stocks’ market caps are closest to OSTK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NSA 14 103457 -4
DY 19 277404 0
CWT 8 100631 -2
CSOD 28 652188 -6
ESE 8 85089 -5
PJT 22 90165 0
TWOU 23 745360 1
Average 17.4 293471 -2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $293 million. That figure was $169 million in OSTK’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand California Water Service Group (NYSE:CWT) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Overstock.com, Inc. (NASDAQ:OSTK) is more popular among hedge funds. Our overall hedge fund sentiment score for OSTK is 90. 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 returned 22.8% in 2021 through July 2nd but still managed to beat the market by 6 percentage points. Hedge funds were also right about betting on OSTK as the stock returned 32.7% since the end of March (through 7/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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