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Here’s What Hedge Funds Think About Bank OZK (OZK)

How do we determine whether Bank OZK (NASDAQ:OZK) makes for a good investment at the moment? We analyze the sentiment of a select group of the very best investors in the world, who spend immense amounts of time and resources studying companies. They may not always be right (no one is), but data shows that their consensus long positions have historically outperformed the market when we adjust for known risk factors.

Bank OZK (NASDAQ:OZK) investors should pay attention to an increase in enthusiasm from smart money recently. Our calculations also showed that OZK isn’t among the 30 most popular stocks among hedge funds.

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. 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 market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

BlueMountain Capital Management's Returns, AUM and Holdings

We’re going to analyze the key hedge fund action encompassing Bank OZK (NASDAQ:OZK).

What does the smart money think about Bank OZK (NASDAQ:OZK)?

Heading into the second quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OZK over the last 15 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

OZK_june2019

Among these funds, Diamond Hill Capital held the most valuable stake in Bank OZK (NASDAQ:OZK), which was worth $183.2 million at the end of the first quarter. On the second spot was Giverny Capital which amassed $20.1 million worth of shares. Moreover, Renaissance Technologies, Two Sigma Advisors, and Millennium Management were also bullish on Bank OZK (NASDAQ:OZK), allocating a large percentage of their portfolios to this stock.

Now, key hedge funds have jumped into Bank OZK (NASDAQ:OZK) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most valuable position in Bank OZK (NASDAQ:OZK). Arrowstreet Capital had $4.8 million invested in the company at the end of the quarter. Peter Algert and Kevin Coldiron’s Algert Coldiron Investors also initiated a $0.7 million position during the quarter. The other funds with brand new OZK positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Joel Greenblatt’s Gotham Asset Management, and Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Bank OZK (NASDAQ:OZK) but similarly valued. These stocks are Enstar Group Ltd. (NASDAQ:ESGR), PBF Energy Inc (NYSE:PBF), Evercore Inc. (NYSE:EVR), and Schneider National, Inc. (NYSE:SNDR). This group of stocks’ market caps resemble OZK’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ESGR 11 348751 2
PBF 22 342765 4
EVR 25 342735 1
SNDR 19 121921 -1
Average 19.25 289043 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $289 million. That figure was $257 million in OZK’s case. Evercore Inc. (NYSE:EVR) is the most popular stock in this table. On the other hand Enstar Group Ltd. (NASDAQ:ESGR) is the least popular one with only 11 bullish hedge fund positions. Bank OZK (NASDAQ:OZK) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on OZK as the stock returned 4.2% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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

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