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Is Oil-Dri Corporation of America (ODC) A Good Stock To Buy According To Hedge Funds?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. In this article we are going to take a look at smart money sentiment towards Oil-Dri Corporation of America (NYSE:ODC).

Oil-Dri Corporation of America (NYSE:ODC) was in 4 hedge funds’ portfolios at the end of March. ODC shareholders have witnessed an increase in hedge fund interest recently. There were 3 hedge funds in our database with ODC holdings at the end of the previous quarter. Our calculations also showed that ODC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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 44 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.

Mario Gabelli of GAMCO Investors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the key hedge fund action regarding Oil-Dri Corporation of America (NYSE:ODC).

What does smart money think about Oil-Dri Corporation of America (NYSE:ODC)?

At Q1’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the fourth quarter of 2019. By comparison, 3 hedge funds held shares or bullish call options in ODC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, GAMCO Investors, managed by Mario Gabelli, holds the number one position in Oil-Dri Corporation of America (NYSE:ODC). GAMCO Investors has a $17.3 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Renaissance Technologies, holding a $12.7 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers that are bullish contain Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Chuck Royce’s Royce & Associates and . In terms of the portfolio weights assigned to each position GAMCO Investors allocated the biggest weight to Oil-Dri Corporation of America (NYSE:ODC), around 0.2% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to ODC.

As aggregate interest increased, key hedge funds have jumped into Oil-Dri Corporation of America (NYSE:ODC) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Oil-Dri Corporation of America (NYSE:ODC). Arrowstreet Capital had $0.5 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also initiated a $0 million position during the quarter.

Let’s now review hedge fund activity in other stocks similar to Oil-Dri Corporation of America (NYSE:ODC). These stocks are Atlantic Capital Bancshares, Inc. (NASDAQ:ACBI), Landec Corporation (NASDAQ:LNDC), Gladstone Land Corporation (NASDAQ:LAND), and Personalis, Inc. (NASDAQ:PSNL). This group of stocks’ market values match ODC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACBI 14 37356 0
LNDC 15 58125 3
LAND 8 9231 1
PSNL 5 7405 -5
Average 10.5 28029 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $31 million in ODC’s case. Landec Corporation (NASDAQ:LNDC) is the most popular stock in this table. On the other hand Personalis, Inc. (NASDAQ:PSNL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Oil-Dri Corporation of America (NYSE:ODC) is even less popular than PSNL. Hedge funds dodged a bullet by taking a bearish stance towards ODC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately ODC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ODC investors were disappointed as the stock returned 6.7% during the second quarter (through the end of May) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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

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