Is Orion Engineered Carbons SA (OEC) Going to Burn These Hedge Funds?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Orion Engineered Carbons SA (NYSE:OEC).

Orion Engineered Carbons SA (NYSE:OEC) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 19 hedge funds’ portfolios at the end of March. Our calculations also showed that OEC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare OEC to other stocks including Fortuna Silver Mines Inc. (NYSE:FSM), Bolt Biotherapeutics, Inc. (NASDAQ:BOLT), and National Research Corporation (NASDAQ:NRC) to get a better sense of its popularity.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind let’s view the new hedge fund action regarding Orion Engineered Carbons SA (NYSE:OEC).

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

At first quarter’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in OEC a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is OEC A Good Stock To Buy?

Among these funds, Pzena Investment Management held the most valuable stake in Orion Engineered Carbons SA (NYSE:OEC), which was worth $49.3 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $47 million worth of shares. Inherent Group, First Pacific Advisors LLC, and Harspring 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 Harvey Partners allocated the biggest weight to Orion Engineered Carbons SA (NYSE:OEC), around 4.14% of its 13F portfolio. Inherent Group is also relatively very bullish on the stock, setting aside 3.23 percent of its 13F equity portfolio to OEC.

Judging by the fact that Orion Engineered Carbons SA (NYSE:OEC) has witnessed a decline in interest from hedge fund managers, logic holds that there were a few hedge funds who sold off their full holdings last quarter. Interestingly, Noam Gottesman’s GLG Partners said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, worth an estimated $7 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also sold off its stock, about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Orion Engineered Carbons SA (NYSE:OEC). We will take a look at Fortuna Silver Mines Inc. (NYSE:FSM), Bolt Biotherapeutics, Inc. (NASDAQ:BOLT), National Research Corporation (NASDAQ:NRC), Opera Limited (NASDAQ:OPRA), Apollo Medical Holdings, Inc. (NASDAQ:AMEH), WideOpenWest, Inc. (NYSE:WOW), and IMAX Corporation (NYSE:IMAX). All of these stocks’ market caps match OEC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FSM 12 19878 1
BOLT 23 423044 23
NRC 9 31401 -3
OPRA 5 7933 2
AMEH 7 16922 1
WOW 14 178652 1
IMAX 22 194008 5
Average 13.1 124548 4.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.1 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $186 million in OEC’s case. Bolt Biotherapeutics, Inc. (NASDAQ:BOLT) is the most popular stock in this table. On the other hand Opera Limited (NASDAQ:OPRA) is the least popular one with only 5 bullish hedge fund positions. Orion Engineered Carbons SA (NYSE:OEC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OEC is 64.2. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately OEC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on OEC were disappointed as the stock returned -10.1% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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