Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Otis Worldwide Corporation (NYSE:OTIS).
Is OTIS a good stock to buy now? Otis Worldwide Corporation (NYSE:OTIS) was in 53 hedge funds’ portfolios at the end of September. The all time high for this statistics is 56. OTIS has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 56 hedge funds in our database with OTIS holdings at the end of June. Our calculations also showed that OTIS 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.
In the eyes of most market participants, hedge funds are assumed to be unimportant, outdated financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open at the moment, Our researchers choose to focus on the elite of this group, about 850 funds. These investment experts handle bulk of the hedge fund industry’s total capital, and by watching their finest investments, Insider Monkey has unsheathed a number of investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually 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 .
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What have hedge funds been doing with Otis Worldwide Corporation (NYSE:OTIS)?
Heading into the fourth quarter of 2020, a total of 53 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in OTIS over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Otis Worldwide Corporation (NYSE:OTIS) was held by Deccan Value Advisors, which reported holding $332.7 million worth of stock at the end of September. It was followed by Ako Capital with a $283.4 million position. Other investors bullish on the company included Viking Global, Suvretta Capital Management, and Gates Capital Management. In terms of the portfolio weights assigned to each position Sandbar Asset Management allocated the biggest weight to Otis Worldwide Corporation (NYSE:OTIS), around 16.83% of its 13F portfolio. Deccan Value Advisors is also relatively very bullish on the stock, dishing out 15.13 percent of its 13F equity portfolio to OTIS.
Since Otis Worldwide Corporation (NYSE:OTIS) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of funds who were dropping their full holdings in the third quarter. It’s worth mentioning that Brandon Haley’s Holocene Advisors dropped the largest investment of the 750 funds followed by Insider Monkey, totaling about $84.3 million in stock, and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC was right behind this move, as the fund said goodbye to about $65 million worth. These transactions are interesting, as total hedge fund interest was cut by 3 funds in the third quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Otis Worldwide Corporation (NYSE:OTIS) but similarly valued. We will take a look at Manulife Financial Corporation (NYSE:MFC), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), Wipro Limited (NYSE:WIT), Motorola Solutions Inc (NYSE:MSI), Marvell Technology Group Ltd. (NASDAQ:MRVL), Franco-Nevada Corporation (NYSE:FNV), and The Clorox Company (NYSE:CLX). This group of stocks’ market caps resemble OTIS’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $1097 million. That figure was $2225 million in OTIS’s case. Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Otis Worldwide Corporation (NYSE:OTIS) is more popular among hedge funds. Our overall hedge fund sentiment score for OTIS is 80.4. 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 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. Unfortunately OTIS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OTIS were disappointed as the stock returned 5.6% since the end of the third quarter (through 12/2) 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 most of these stocks already outperformed the market in 2020.
Disclosure: None. This article was originally published at Insider Monkey.