In this article we will check out the progression of hedge fund sentiment towards ONEOK, Inc. (NYSE:OKE) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
ONEOK, Inc. (NYSE:OKE) was in 20 hedge funds’ portfolios at the end of March. The all time high for this statistic is 31. OKE shareholders have witnessed a decrease in support from the world’s most elite money managers recently. There were 22 hedge funds in our database with OKE positions at the end of the fourth quarter. Our calculations also showed that OKE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was 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). So you can still find a lot of gems by following hedge funds’ moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 we’re going to view the new hedge fund action surrounding ONEOK, Inc. (NYSE:OKE).
Do Hedge Funds Think OKE Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OKE over the last 23 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in ONEOK, Inc. (NYSE:OKE). Citadel Investment Group has a $28 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Phill Gross and Robert Atchinson of Adage Capital Management, with a $23.2 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers that are bullish comprise D. E. Shaw’s D E Shaw, Mario Gabelli’s GAMCO Investors and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Heronetta Management allocated the biggest weight to ONEOK, Inc. (NYSE:OKE), around 4.11% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, earmarking 0.66 percent of its 13F equity portfolio to OKE.
Judging by the fact that ONEOK, Inc. (NYSE:OKE) has faced a decline in interest from the smart money, it’s easy to see that there is a sect of hedge funds that slashed their full holdings last quarter. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors dropped the largest investment of the 750 funds monitored by Insider Monkey, valued at an estimated $24.1 million in stock, and Renaissance Technologies was right behind this move, as the fund sold off about $4.3 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as ONEOK, Inc. (NYSE:OKE) but similarly valued. These stocks are Baker Hughes Company (NYSE:BKR), Verisign, Inc. (NASDAQ:VRSN), Zillow Group Inc (NASDAQ:Z), Alexandria Real Estate Equities Inc (NYSE:ARE), FleetCor Technologies, Inc. (NYSE:FLT), Vulcan Materials Company (NYSE:VMC), and EPAM Systems Inc (NYSE:EPAM). This group of stocks’ market values match OKE’s market value.
|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 43.4 hedge funds with bullish positions and the average amount invested in these stocks was $2281 million. That figure was $67 million in OKE’s case. Zillow Group Inc (NASDAQ:Z) is the most popular stock in this table. On the other hand EPAM Systems Inc (NYSE:EPAM) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks ONEOK, Inc. (NYSE:OKE) is even less popular than EPAM. Our overall hedge fund sentiment score for OKE is 22.4. 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. Hedge funds dodged a bullet by taking a bearish stance towards OKE. Our calculations showed that the top 10 most popular hedge fund stocks returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th but managed to beat the market again by 7.7 percentage points. Unfortunately OKE wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was very bearish); OKE investors were disappointed as the stock returned 7.2% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.