In this article we will take a look at whether hedge funds think The ODP Corporation (NYSE:ODP) is 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, unconventional data sources, 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.
Is ODP a good stock to buy now? Hedge fund interest in The ODP Corporation (NYSE:ODP) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ODP 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). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as TPI Composites, Inc. (NASDAQ:TPIC), Covanta Holding Corporation (NYSE:CVA), and Malibu Boats Inc (NASDAQ:MBUU) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
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 we’re going to take a peek at the key hedge fund action regarding The ODP Corporation (NYSE:ODP).
Do Hedge Funds Think ODP Is A Good Stock To Buy Now?
At third quarter’s end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in ODP over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, HG Vora Capital Management was the largest shareholder of The ODP Corporation (NYSE:ODP), with a stake worth $97.3 million reported as of the end of September. Trailing HG Vora Capital Management was Canyon Capital Advisors, which amassed a stake valued at $53.2 million. Arrowstreet Capital, Alta Fundamental Advisers, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position HG Vora Capital Management allocated the biggest weight to The ODP Corporation (NYSE:ODP), around 7.33% of its 13F portfolio. Alta Fundamental Advisers is also relatively very bullish on the stock, earmarking 7.21 percent of its 13F equity portfolio to ODP.
Judging by the fact that The ODP Corporation (NYSE:ODP) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there lies a certain “tier” of hedge funds who were dropping their entire stakes last quarter. Intriguingly, Manoj Jain and Sohit Khurana’s Maso Capital sold off the largest investment of the 750 funds tracked by Insider Monkey, valued at close to $2.9 million in stock, and Paul Marshall and Ian Wace’s Marshall Wace LLP was right behind this move, as the fund dumped about $2.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now review hedge fund activity in other stocks similar to The ODP Corporation (NYSE:ODP). We will take a look at TPI Composites, Inc. (NASDAQ:TPIC), Covanta Holding Corporation (NYSE:CVA), Malibu Boats Inc (NASDAQ:MBUU), Ferro Corporation (NYSE:FOE), Comstock Resources Inc (NYSE:CRK), Franchise Group, Inc. (NASDAQ:FRG), and The Macerich Company (NYSE:MAC). All of these stocks’ market caps are closest to ODP’s market cap.
|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 18.7 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $182 million in ODP’s case. Comstock Resources Inc (NYSE:CRK) is the most popular stock in this table. On the other hand Franchise Group, Inc. (NASDAQ:FRG) is the least popular one with only 12 bullish hedge fund positions. The ODP Corporation (NYSE:ODP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ODP is 39.3. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on ODP as the stock returned 38.8% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.