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Overseas Shipholding Group, Inc. (OSG): Are Hedge Funds Right About This Stock?

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 821 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 March 31st, a week after the market trough. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Overseas Shipholding Group, Inc. (NYSE:OSG) and determine whether the smart money was really smart about this stock.

Is Overseas Shipholding Group, Inc. (NYSE:OSG) a worthy investment right now? Prominent investors were becoming less confident. The number of bullish hedge fund bets went down by 1 lately. Our calculations also showed that OSG 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). OSG was in 11 hedge funds’ portfolios at the end of the first quarter of 2020. There were 12 hedge funds in our database with OSG holdings at the end of the previous quarter.

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

In the eyes of most market participants, hedge funds are viewed as worthless, old investment vehicles of the past. While there are more than 8000 funds with their doors open at present, We hone in on the masters of this club, approximately 850 funds. These money managers handle the majority of all hedge funds’ total asset base, and by observing their inimitable picks, Insider Monkey has unearthed several investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

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At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the key hedge fund action surrounding Overseas Shipholding Group, Inc. (NYSE:OSG).

How are hedge funds trading Overseas Shipholding Group, Inc. (NYSE:OSG)?

At Q1’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OSG over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is OSG A Good Stock To Buy?

Among these funds, Cyrus Capital Partners held the most valuable stake in Overseas Shipholding Group, Inc. (NYSE:OSG), which was worth $20.2 million at the end of the third quarter. On the second spot was Paulson & Co which amassed $14.3 million worth of shares. Renaissance Technologies, D E Shaw, and Arrowstreet 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 Cyrus Capital Partners allocated the biggest weight to Overseas Shipholding Group, Inc. (NYSE:OSG), around 7.42% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, designating 0.55 percent of its 13F equity portfolio to OSG.

Judging by the fact that Overseas Shipholding Group, Inc. (NYSE:OSG) has experienced falling interest from hedge fund managers, it’s easy to see that there were a few fund managers that slashed their full holdings last quarter. At the top of the heap, Cliff Asness’s AQR Capital Management cut the biggest stake of all the hedgies watched by Insider Monkey, valued at about $0.4 million in stock, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors was right behind this move, as the fund sold off about $0.1 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Overseas Shipholding Group, Inc. (NYSE:OSG) but similarly valued. These stocks are Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH), Orchid Island Capital, Inc. (NYSE:ORC), ECMOHO Limited (NASDAQ:MOHO), and XOMA Corp (NASDAQ:XOMA). This group of stocks’ market values are similar to OSG’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RUTH 16 16583 2
ORC 8 11411 5
MOHO 1 94 0
XOMA 8 75782 -2
Average 8.25 25968 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.25 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was $42 million in OSG’s case. Ruth’s Hospitality Group, Inc. (NASDAQ:RUTH) is the most popular stock in this table. On the other hand ECMOHO Limited (NASDAQ:MOHO) is the least popular one with only 1 bullish hedge fund positions. Overseas Shipholding Group, Inc. (NYSE:OSG) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.3% in 2020 through June 30th but beat the market by 15.5 percentage points. Unfortunately OSG wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on OSG were disappointed as the stock returned -18.1% 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.