Is OLN A Good Stock To Buy According To Hedge Funds?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Olin Corporation (NYSE:OLN) changed recently.

Is OLN a good stock to buy? Olin Corporation (NYSE:OLN) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 33 hedge funds’ portfolios at the end of the third quarter of 2020. Our calculations also showed that OLN 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). At the end of this article we will also compare OLN to other stocks including Eidos Therapeutics, Inc. (NASDAQ:EIDX), Main Street Capital Corporation (NYSE:MAIN), and Allegiant Travel Company (NASDAQ:ALGT) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most traders, hedge funds are viewed as worthless, outdated financial tools of years past. While there are over 8000 funds trading at present, We look at the aristocrats of this group, about 850 funds. Most estimates calculate that this group of people oversee the lion’s share of all hedge funds’ total asset base, and by observing their inimitable stock picks, Insider Monkey has unearthed various investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment ManagementRichard S. Pzena

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now let’s take a glance at the recent hedge fund action surrounding Olin Corporation (NYSE:OLN).

Do Hedge Funds Think OLN Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards OLN over the last 21 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is OLN A Good Stock To Buy?

The largest stake in Olin Corporation (NYSE:OLN) was held by Sachem Head Capital, which reported holding $185.1 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $77.6 million position. Other investors bullish on the company included Adage Capital Management, East Side Capital (RR Partners), and Samlyn Capital. In terms of the portfolio weights assigned to each position Sachem Head Capital allocated the biggest weight to Olin Corporation (NYSE:OLN), around 11.22% of its 13F portfolio. Proxima Capital Management is also relatively very bullish on the stock, setting aside 10.12 percent of its 13F equity portfolio to OLN.

Due to the fact that Olin Corporation (NYSE:OLN) has experienced a decline in interest from hedge fund managers, we can see that there was a specific group of fund managers who sold off their positions entirely in the third quarter. At the top of the heap, Michael Cowley’s Sandbar Asset Management dropped the biggest investment of the 750 funds watched by Insider Monkey, worth close to $5.2 million in stock. Steve Cohen’s fund, Point72 Asset Management, also cut its stock, about $3.7 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Olin Corporation (NYSE:OLN) but similarly valued. These stocks are Eidos Therapeutics, Inc. (NASDAQ:EIDX), Main Street Capital Corporation (NYSE:MAIN), Allegiant Travel Company (NASDAQ:ALGT), Cimpress plc (NASDAQ:CMPR), Inovio Pharmaceuticals Inc (NYSE:INO), Moelis & Company (NYSE:MC), and Associated Banc Corp (NYSE:ASB). This group of stocks’ market valuations resemble OLN’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EIDX 13 254264 -4
MAIN 4 10635 -3
ALGT 24 344081 1
CMPR 25 260556 0
INO 16 66802 2
MC 13 68166 5
ASB 21 177092 -1
Average 16.6 168799 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $169 million. That figure was $460 million in OLN’s case. Cimpress plc (NASDAQ:CMPR) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Olin Corporation (NYSE:OLN) is more popular among hedge funds. Our overall hedge fund sentiment score for OLN is 83.3. 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 returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on OLN as the stock returned 110.3% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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