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 (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Owens Corning (NYSE:OC).
Owens Corning (NYSE:OC) has seen an increase in hedge fund interest of late. OC was in 47 hedge funds’ portfolios at the end of December. There were 43 hedge funds in our database with OC holdings at the end of the previous quarter. Our calculations also showed that OC 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).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
George Soros of Soros Fund Management
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. With all of this in mind let’s take a glance at the recent hedge fund action surrounding Owens Corning (NYSE:OC).
Hedge fund activity in Owens Corning (NYSE:OC)
Heading into the first quarter of 2020, a total of 47 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. By comparison, 40 hedge funds held shares or bullish call options in OC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, John Khoury’s Long Pond Capital has the number one position in Owens Corning (NYSE:OC), worth close to $210.6 million, corresponding to 5.4% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, managed by Ken Griffin, which holds a $206.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish contain Cliff Asness’s AQR Capital Management, Israel Englander’s Millennium Management and Phill Gross and Robert Atchinson’s Adage Capital Management. In terms of the portfolio weights assigned to each position Lodge Hill Capital allocated the biggest weight to Owens Corning (NYSE:OC), around 6.41% of its 13F portfolio. Long Pond Capital is also relatively very bullish on the stock, designating 5.38 percent of its 13F equity portfolio to OC.
As aggregate interest increased, key money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most outsized position in Owens Corning (NYSE:OC). Balyasny Asset Management had $50.6 million invested in the company at the end of the quarter. Andrew Byington’s Appian Way Asset Management also initiated a $5.9 million position during the quarter. The other funds with brand new OC positions are George Soros’s Soros Fund Management, James Parsons’s Junto Capital Management, and Robert Vincent McHugh’s Jade Capital Advisors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Owens Corning (NYSE:OC) but similarly valued. We will take a look at BRF S.A. (NYSE:BRFS), CAE, Inc. (NYSE:CAE), Chemed Corporation (NYSE:CHE), and Perrigo Company (NYSE:PRGO). All of these stocks’ market caps are similar to OC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BRFS | 14 | 119708 | 0 |
| CAE | 10 | 138012 | -1 |
| CHE | 22 | 399646 | -1 |
| PRGO | 27 | 237292 | 11 |
| Average | 18.25 | 223665 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $224 million. That figure was $1080 million in OC’s case. Perrigo Company (NYSE:PRGO) is the most popular stock in this table. On the other hand CAE, Inc. (NYSE:CAE) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Owens Corning (NYSE:OC) is more popular among hedge funds. 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 22.3% in 2020 through March 16th and still beat the market by 3.2 percentage points. Unfortunately OC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OC were disappointed as the stock returned -47.3% during the first two and a half months of 2020 (through March 16th) 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 most of these stocks already outperformed the market in Q1.
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.
