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Is Bank OZK (OZK) Going to Burn These Hedge Funds?

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Bank OZK (NASDAQ:OZK).

Bank OZK (NASDAQ:OZK) was in 21 hedge funds’ portfolios at the end of June. OZK has experienced an increase in hedge fund interest in recent months. There were 20 hedge funds in our database with OZK positions at the end of the previous quarter. Our calculations also showed that OZK isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Izzy Englander of MILLENNIUM MANAGEMENT

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a look at the latest hedge fund action encompassing Bank OZK (NASDAQ:OZK).

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

At Q2’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in OZK a year ago. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

No of Hedge Funds with OZK Positions

More specifically, Diamond Hill Capital was the largest shareholder of Bank OZK (NASDAQ:OZK), with a stake worth $188.8 million reported as of the end of March. Trailing Diamond Hill Capital was Renaissance Technologies, which amassed a stake valued at $22.4 million. Giverny Capital, Citadel Investment Group, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, some big names were leading the bulls’ herd. Maverick Capital, managed by Lee Ainslie, created the most valuable position in Bank OZK (NASDAQ:OZK). Maverick Capital had $7.9 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $0.6 million investment in the stock during the quarter. The other funds with brand new OZK positions are Michael Gelband’s ExodusPoint Capital, George Zweig, Shane Haas and Ravi Chander’s Signition LP, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Bank OZK (NASDAQ:OZK) but similarly valued. We will take a look at Transocean Ltd (NYSE:RIG), United Bankshares, Inc. (NASDAQ:UBSI), NCR Corporation (NYSE:NCR), and Perspecta Inc. (NYSE:PRSP). This group of stocks’ market values resemble OZK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RIG 31 494387 -6
UBSI 14 26711 6
NCR 24 263623 2
PRSP 40 776252 6
Average 27.25 390243 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $390 million. That figure was $286 million in OZK’s case. Perspecta Inc. (NYSE:PRSP) is the most popular stock in this table. On the other hand United Bankshares, Inc. (NASDAQ:UBSI) is the least popular one with only 14 bullish hedge fund positions. Bank OZK (NASDAQ:OZK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately OZK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); OZK investors were disappointed as the stock returned -8.6% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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

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