You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.
Is Omega Healthcare Investors Inc (NYSE:OHI) a splendid investment today? Money managers are taking an optimistic view. The number of bullish hedge fund bets rose by 2 recently. Our calculations also showed that OHI isn’t among the 30 most popular stocks among hedge funds. OHI was in 13 hedge funds’ portfolios at the end of March. There were 11 hedge funds in our database with OHI positions at the end of the previous quarter.
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.
Let’s take a peek at the latest hedge fund action regarding Omega Healthcare Investors Inc (NYSE:OHI).
What does smart money think about Omega Healthcare Investors Inc (NYSE:OHI)?
At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in OHI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Zimmer Partners was the largest shareholder of Omega Healthcare Investors Inc (NYSE:OHI), with a stake worth $111.4 million reported as of the end of March. Trailing Zimmer Partners was Renaissance Technologies, which amassed a stake valued at $70.9 million. Two Sigma Advisors, Balyasny Asset Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, key hedge funds were breaking ground themselves. Zimmer Partners, managed by Stuart J. Zimmer, assembled the largest position in Omega Healthcare Investors Inc (NYSE:OHI). Zimmer Partners had $111.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also made a $3.1 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Omega Healthcare Investors Inc (NYSE:OHI) but similarly valued. We will take a look at Oaktree Capital Group LLC (NYSE:OAK), ANGI Homeservices Inc. (NASDAQ:ANGI), Invesco Ltd. (NYSE:IVZ), and Robert Half International Inc. (NYSE:RHI). This group of stocks’ market valuations resemble OHI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OAK | 15 | 201018 | 8 |
| ANGI | 22 | 402901 | 0 |
| IVZ | 24 | 172793 | 0 |
| RHI | 25 | 642582 | -1 |
| Average | 21.5 | 354824 | 1.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.5 hedge funds with bullish positions and the average amount invested in these stocks was $355 million. That figure was $242 million in OHI’s case. Robert Half International Inc. (NYSE:RHI) is the most popular stock in this table. On the other hand Oaktree Capital Group LLC (NYSE:OAK) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Omega Healthcare Investors Inc (NYSE:OHI) is even less popular than OAK. Hedge funds dodged a bullet by taking a bearish stance towards OHI. Our calculations showed that the top 20 most popular hedge fund stocks returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately OHI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); OHI investors were disappointed as the stock returned 0.8% during the same time frame 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 13 of these stocks already outperformed the market so far in the second quarter.
Disclosure: None. This article was originally published at Insider Monkey.
