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Olin Corporation (OLN): Hedge Funds In Wait-and-See Mode

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Olin Corporation (NYSE:OLN) and determine whether the smart money was really smart about this stock.

Hedge fund interest in Olin Corporation (NYSE:OLN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that OLN isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB), Uniti Group Inc. (NASDAQ:UNIT), and Immunovant, Inc. (NASDAQ:IMVT) to get a better sense of its popularity.

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

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. 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 56 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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Scott Ferguson Sachem Head Capital

Scott Ferguson of Sachem Head Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind let’s check out the latest hedge fund action surrounding Olin Corporation (NYSE:OLN).

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

At second quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OLN over the last 20 quarters. So, let’s review 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 $171.8 million worth of stock at the end of September. It was followed by Pzena Investment Management with a $67 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 12.23% of its 13F portfolio. Proxima Capital Management is also relatively very bullish on the stock, setting aside 8.63 percent of its 13F equity portfolio to OLN.

Since Olin Corporation (NYSE:OLN) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there were a few hedge funds who sold off their entire stakes in the second quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest stake of the 750 funds monitored by Insider Monkey, comprising an estimated $3.6 million in stock. Ed Bosek’s fund, BeaconLight Capital, also sold off its stock, about $3.1 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine 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 Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB), Uniti Group Inc. (NASDAQ:UNIT), Immunovant, Inc. (NASDAQ:IMVT), PQ Group Holdings Inc. (NYSE:PQG), SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), American Eagle Outfitters Inc. (NYSE:AEO), and Madison Square Garden Entertainment Corp. (NYSE:MSGE). This group of stocks’ market values match OLN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
OMAB 4 34250 0
UNIT 17 79043 4
IMVT 31 330242 3
PQG 6 46807 -1
SWTX 15 754975 1
AEO 36 519270 10
MSGE 38 404860 38
Average 21 309921 7.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $310 million. That figure was $448 million in OLN’s case. Madison Square Garden Entertainment Corp. (NYSE:MSGE) is the most popular stock in this table. On the other hand Grupo Aeroportuario del Centro Norte, S.A.B. de C.V. (NASDAQ:OMAB) is the least popular one with only 4 bullish hedge fund positions. Olin Corporation (NYSE:OLN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OLN is 75.9. 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 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 33% in 2020 through the end of August and beat the market by 23.2 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 -0.3% during the same time period 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 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.