Is Norbord Inc. (NYSE:OSB) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Norbord Inc. (NYSE:OSB) has experienced a decrease in hedge fund interest of late. Our calculations also showed that OSB isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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. We’re going to view the fresh hedge fund action regarding Norbord Inc. (NYSE:OSB).
Hedge fund activity in Norbord Inc. (NYSE:OSB)
At the end of the second quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards OSB over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Norbord Inc. (NYSE:OSB) was held by Renaissance Technologies, which reported holding $9.7 million worth of stock at the end of March. It was followed by Millennium Management with a $1.1 million position. Other investors bullish on the company included Two Sigma Advisors, Waratah Capital Advisors, and Gotham Asset Management.
Since Norbord Inc. (NYSE:OSB) has experienced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedgies that elected to cut their entire stakes last quarter. Interestingly, Ken Griffin’s Citadel Investment Group dumped the biggest position of the “upper crust” of funds followed by Insider Monkey, worth an estimated $6.7 million in stock. Steve Cohen’s fund, Point72 Asset Management, also sold off its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Norbord Inc. (NYSE:OSB) but similarly valued. We will take a look at Meritage Homes Corporation (NYSE:MTH), Inter Parfums, Inc. (NASDAQ:IPAR), Great Western Bancorp Inc (NYSE:GWB), and Kinsale Capital Group, Inc. (NASDAQ:KNSL). This group of stocks’ market values resemble OSB’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 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $13 million in OSB’s case. Inter Parfums, Inc. (NASDAQ:IPAR) is the most popular stock in this table. On the other hand Great Western Bancorp Inc (NYSE:GWB) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Norbord Inc. (NYSE:OSB) is even less popular than GWB. Hedge funds dodged a bullet by taking a bearish stance towards OSB. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately OSB wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); OSB investors were disappointed as the stock returned -2.1% 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.