The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on September 30th, about a month before the elections. We at Insider Monkey have made an extensive database of more than 817 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Oaktree Specialty Lending Corporation (NASDAQ:OCSL) based on those filings.
Is OCSL a good stock to buy now? Investors who are in the know were turning bullish. The number of long hedge fund positions went up by 2 in recent months. Oaktree Specialty Lending Corporation (NASDAQ:OCSL) was in 14 hedge funds’ portfolios at the end of September. The all time high for this statistic is 19. Our calculations also showed that OCSL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 12 hedge funds in our database with OCSL positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by 66 percentage points since March 2017 (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.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let’s check out the fresh hedge fund action encompassing Oaktree Specialty Lending Corporation (NASDAQ:OCSL).
Do Hedge Funds Think OCSL Is A Good Stock To Buy Now?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OCSL over the last 21 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Springhouse Capital Management, managed by Brian Gaines, holds the most valuable position in Oaktree Specialty Lending Corporation (NASDAQ:OCSL). Springhouse Capital Management has a $16.2 million position in the stock, comprising 24.3% of its 13F portfolio. On Springhouse Capital Management’s heels is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $9.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other members of the smart money that hold long positions consist of Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors and Frederick Tucker Golden’s Solas Capital Management. In terms of the portfolio weights assigned to each position Springhouse Capital Management allocated the biggest weight to Oaktree Specialty Lending Corporation (NASDAQ:OCSL), around 24.34% of its 13F portfolio. Solas Capital Management is also relatively very bullish on the stock, setting aside 3.66 percent of its 13F equity portfolio to OCSL.
Now, some big names were leading the bulls’ herd. Callodine Capital Management, managed by James Morrow, established the most valuable position in Oaktree Specialty Lending Corporation (NASDAQ:OCSL). Callodine Capital Management had $0.4 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Karim Abbadi and Edward McBride’s Centiva Capital.
Let’s go over hedge fund activity in other stocks similar to Oaktree Specialty Lending Corporation (NASDAQ:OCSL). These stocks are Oxford Industries, Inc. (NYSE:OXM), Tivity Health, Inc. (NASDAQ:TVTY), American Finance Trust, Inc. (NASDAQ:AFIN), Foundation Building Materials, Inc. (NYSE:FBM), SI-BONE, Inc. (NASDAQ:SIBN), Core Laboratories N.V. (NYSE:CLB), and Inhibrx, Inc. (NASDAQ:INBX). All of these stocks’ market caps are closest to OCSL’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 13.4 hedge funds with bullish positions and the average amount invested in these stocks was $115 million. That figure was $49 million in OCSL’s case. SI-BONE, Inc. (NASDAQ:SIBN) is the most popular stock in this table. On the other hand Oxford Industries, Inc. (NYSE:OXM) is the least popular one with only 8 bullish hedge fund positions. Oaktree Specialty Lending Corporation (NASDAQ:OCSL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OCSL is 56.4. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on OCSL as the stock returned 15.9% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.