In this article we will check out the progression of hedge fund sentiment towards Overstock.com, Inc. (NASDAQ:OSTK) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is OSTK a good stock to buy now? The best stock pickers were taking an optimistic view. The number of bullish hedge fund bets increased by 7 recently. Overstock.com, Inc. (NASDAQ:OSTK) was in 22 hedge funds’ portfolios at the end of September. The all time high for this statistic is 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OSTK 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely 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. Keeping this in mind let’s take a peek at the new hedge fund action regarding Overstock.com, Inc. (NASDAQ:OSTK).
Do Hedge Funds Think OSTK Is A Good Stock To Buy Now?
At third quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 47% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards OSTK 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.
Of the funds tracked by Insider Monkey, Renaissance Technologies has the most valuable position in Overstock.com, Inc. (NASDAQ:OSTK), worth close to $114.6 million, amounting to 0.1% of its total 13F portfolio. On Renaissance Technologies’s heels is D E Shaw, led by D. E. Shaw, holding a $66.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Thomas E. Claugus’s GMT Capital and Alexander Mitchell’s Scopus Asset Management. In terms of the portfolio weights assigned to each position GMT Capital allocated the biggest weight to Overstock.com, Inc. (NASDAQ:OSTK), around 3.49% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, designating 0.43 percent of its 13F equity portfolio to OSTK.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Scopus Asset Management, managed by Alexander Mitchell, assembled the largest position in Overstock.com, Inc. (NASDAQ:OSTK). Scopus Asset Management had $15.4 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $8 million investment in the stock during the quarter. The other funds with brand new OSTK positions are Richard Driehaus’s Driehaus Capital, Noam Gottesman’s GLG Partners, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Overstock.com, Inc. (NASDAQ:OSTK). We will take a look at Covetrus, Inc. (NASDAQ:CVET), Compania de Minas Buenaventura SA (NYSE:BVN), SVMK Inc. (NASDAQ:SVMK), JetBlue Airways Corporation (NASDAQ:JBLU), Fox Factory Holding Corp (NASDAQ:FOXF), Selective Insurance Group (NASDAQ:SIGI), and 51job, Inc. (NASDAQ:JOBS). This group of stocks’ market caps resemble OSTK’s market cap.
|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 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $133 million. That figure was $368 million in OSTK’s case. SVMK Inc. (NASDAQ:SVMK) is the most popular stock in this table. On the other hand Compania de Minas Buenaventura SA (NYSE:BVN) is the least popular one with only 8 bullish hedge fund positions. Overstock.com, Inc. (NASDAQ:OSTK) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OSTK is 68. 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 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 beat the market again by 15.8 percentage points. Unfortunately OSTK wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OSTK were disappointed as the stock returned -23.1% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.