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Oshkosh Corporation (OSK): Hedge Funds Taking Some Chips Off The Table

In this article you are going to find out whether hedge funds think Oshkosh Corporation (NYSE:OSK) 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.

Oshkosh Corporation (NYSE:OSK) shareholders have witnessed a decrease in hedge fund sentiment recently. OSK was in 22 hedge funds’ portfolios at the end of the first quarter of 2020. There were 28 hedge funds in our database with OSK holdings at the end of the previous quarter. Our calculations also showed that OSK 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).

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Chuck Royce

Chuck Royce of Royce & Associates

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 go over the key hedge fund action surrounding Oshkosh Corporation (NYSE:OSK).

Hedge fund activity in Oshkosh Corporation (NYSE:OSK)

Heading into the second quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OSK over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is OSK A Good Stock To Buy?

More specifically, AQR Capital Management was the largest shareholder of Oshkosh Corporation (NYSE:OSK), with a stake worth $95.8 million reported as of the end of September. Trailing AQR Capital Management was Adage Capital Management, which amassed a stake valued at $38.4 million. Atlantic Investment Management, Lodge Hill Capital, and Skylands Capital 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 Atlantic Investment Management allocated the biggest weight to Oshkosh Corporation (NYSE:OSK), around 13.15% of its 13F portfolio. Lodge Hill Capital is also relatively very bullish on the stock, setting aside 8.09 percent of its 13F equity portfolio to OSK.

Seeing as Oshkosh Corporation (NYSE:OSK) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of fund managers that elected to cut their entire stakes in the first quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, valued at about $36.4 million in stock, and Noam Gottesman’s GLG Partners was right behind this move, as the fund sold off about $36.4 million worth. These transactions are important to note, as total hedge fund interest fell by 6 funds in the first quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Oshkosh Corporation (NYSE:OSK) but similarly valued. We will take a look at Dunkin Brands Group Inc (NASDAQ:DNKN), New York Community Bancorp, Inc. (NYSE:NYCB), CoreSite Realty Corp (NYSE:COR), and Chegg Inc (NYSE:CHGG). This group of stocks’ market valuations match OSK’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DNKN 34 207067 3
NYCB 22 192830 -5
COR 23 267395 2
CHGG 34 302599 -5
Average 28.25 242473 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $242 million. That figure was $215 million in OSK’s case. Dunkin Brands Group Inc (NASDAQ:DNKN) is the most popular stock in this table. On the other hand New York Community Bancorp, Inc. (NYSE:NYCB) is the least popular one with only 22 bullish hedge fund positions. Compared to these stocks Oshkosh Corporation (NYSE:OSK) is even less popular than NYCB. Hedge funds dodged a bullet by taking a bearish stance towards OSK. Our calculations showed that the top 10 most popular hedge fund stocks 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 but managed to beat the market by 14.2 percentage points. Unfortunately OSK wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); OSK investors were disappointed as the stock returned 22.7% during the second quarter (through June 10th) 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 so far in 2020.

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