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ONEOK, Inc. (OKE): Weak Hands Are Selling

In this article you are going to find out whether hedge funds think ONEOK, Inc. (NYSE:OKE) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is ONEOK, Inc. (NYSE:OKE) a bargain? Hedge funds are turning less bullish. The number of bullish hedge fund bets went down by 6 recently. Our calculations also showed that OKE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). OKE was in 25 hedge funds’ portfolios at the end of the first quarter of 2020. There were 31 hedge funds in our database with OKE positions at the end of the previous quarter.

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

In today’s marketplace there are a multitude of methods shareholders employ to size up publicly traded companies. Two of the most under-the-radar methods are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the best picks of the elite fund managers can trounce the broader indices by a solid margin (see the details here).

Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. 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 we’re going to take a look at the recent hedge fund action surrounding ONEOK, Inc. (NYSE:OKE).

Hedge fund activity in ONEOK, Inc. (NYSE:OKE)

Heading into the second quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from the fourth quarter of 2019. On the other hand, there were a total of 14 hedge funds with a bullish position in OKE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Arrowstreet Capital held the most valuable stake in ONEOK, Inc. (NYSE:OKE), which was worth $45.3 million at the end of the third quarter. On the second spot was Millennium Management which amassed $25 million worth of shares. AQR Capital Management, Citadel Investment Group, and Adage 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 Heronetta Management allocated the biggest weight to ONEOK, Inc. (NYSE:OKE), around 3.24% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, earmarking 0.95 percent of its 13F equity portfolio to OKE.

Due to the fact that ONEOK, Inc. (NYSE:OKE) has witnessed falling interest from the smart money, we can see that there is a sect of hedge funds that slashed their full holdings heading into Q4. At the top of the heap, Stuart J. Zimmer’s Zimmer Partners dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $56.8 million in stock. Clint Carlson’s fund, Carlson Capital, also sold off its stock, about $19.4 million worth. These transactions are interesting, as aggregate hedge fund interest dropped by 6 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to ONEOK, Inc. (NYSE:OKE). These stocks are Medical Properties Trust, Inc. (NYSE:MPW), Fair Isaac Corporation (NYSE:FICO), Elanco Animal Health Incorporated (NYSE:ELAN), and NICE Ltd (NASDAQ:NICE). This group of stocks’ market caps are similar to OKE’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MPW 16 164781 2
FICO 41 1225484 -4
ELAN 26 340715 3
NICE 22 373814 3
Average 26.25 526199 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $526 million. That figure was $135 million in OKE’s case. Fair Isaac Corporation (NYSE:FICO) is the most popular stock in this table. On the other hand Medical Properties Trust, Inc. (NYSE:MPW) is the least popular one with only 16 bullish hedge fund positions. ONEOK, Inc. (NYSE:OKE) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on OKE as the stock returned 98.8% during the second quarter and outperformed the market by an even larger margin.

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