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Olin Corporation (OLN): Are Hedge Funds Right About This Stock?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Olin Corporation (NYSE:OLN).

Olin Corporation (NYSE:OLN) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 33 hedge funds’ portfolios at the end of the first quarter of 2020. At the end of this article we will also compare OLN to other stocks including The Simply Good Foods Company (NASDAQ:SMPL), SVMK Inc. (NASDAQ:SVMK), and Greif, Inc. (NYSE:GEF) to get a better sense of its popularity.

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

In today’s marketplace there are many indicators shareholders use to analyze their holdings. A couple of the most underrated indicators are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the best picks of the top money managers can outperform their index-focused peers by a solid amount (see the details here).

Lee Ainslie MAVERICK CAPITAL

Lee Ainslie of Maverick Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the latest hedge fund action surrounding Olin Corporation (NYSE:OLN).

What does smart money think about Olin Corporation (NYSE:OLN)?

At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the fourth quarter of 2019. By comparison, 28 hedge funds held shares or bullish call options in OLN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Olin Corporation (NYSE:OLN) was held by Sachem Head Capital, which reported holding $174.5 million worth of stock at the end of September. It was followed by Adage Capital Management with a $83.7 million position. Other investors bullish on the company included Pzena Investment 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 16.95% of its 13F portfolio. Proxima Capital Management is also relatively very bullish on the stock, earmarking 11.03 percent of its 13F equity portfolio to OLN.

Seeing as Olin Corporation (NYSE:OLN) has witnessed a decline in interest from hedge fund managers, logic holds that there exists a select few money managers that elected to cut their full holdings last quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management cut the largest position of the 750 funds watched by Insider Monkey, comprising close to $8.5 million in stock. Cliff Asness’s fund, AQR Capital Management, also cut its stock, about $8.3 million worth. These bearish behaviors are important to note, as aggregate 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. We will take a look at The Simply Good Foods Company (NASDAQ:SMPL), SVMK Inc. (NASDAQ:SVMK), Greif, Inc. (NYSE:GEF), and Prestige Consumer Healthcare Inc. (NYSE:PBH). This group of stocks’ market caps match OLN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SMPL 19 152168 -15
SVMK 29 211973 -2
GEF 17 64067 -1
PBH 17 86125 3
Average 20.5 128583 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $432 million in OLN’s case. SVMK Inc. (NASDAQ:SVMK) is the most popular stock in this table. On the other hand Greif, Inc. (NYSE:GEF) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Olin Corporation (NYSE:OLN) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds 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 and still beat the market by 13.2 percentage points. Unfortunately OLN wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on OLN were disappointed as the stock returned 4.9% 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 in 2020.

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