The market has been volatile in the last few months as the Federal Reserve finalized its rate cuts and uncertainty looms over trade negotiations with China. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points over the last 12 months. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, though some funds increased their exposure dramatically at the end of Q3 and the beginning of Q4. In this article, we analyze what the smart money thinks of Overseas Shipholding Group, Inc. (NYSE:OSG) and find out how it is affected by hedge funds’ moves.
Hedge fund interest in Overseas Shipholding Group, Inc. (NYSE:OSG) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare OSG to other stocks including U.S. Well Services, Inc. (NASDAQ:USWS), The GDL Fund (NYSE:GDL), and First Savings Financial Group, Inc. (NASDAQ:FSFG) to get a better sense of its popularity.
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If you’d ask most shareholders, hedge funds are seen as slow, old investment vehicles of yesteryear. While there are greater than 8000 funds in operation today, Our researchers hone in on the aristocrats of this club, approximately 750 funds. Most estimates calculate that this group of people manage the lion’s share of all hedge funds’ total capital, and by tracking their best stock picks, Insider Monkey has revealed various investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to review the fresh hedge fund action encompassing Overseas Shipholding Group, Inc. (NYSE:OSG).
What have hedge funds been doing with Overseas Shipholding Group, Inc. (NYSE:OSG)?
Heading into the fourth quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in OSG a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Cyrus Capital Partners held the most valuable stake in Overseas Shipholding Group, Inc. (NYSE:OSG), which was worth $15.6 million at the end of the third quarter. On the second spot was Paulson & Co which amassed $14.5 million worth of shares. Renaissance Technologies, D E Shaw, and AQR 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 Cyrus Capital Partners allocated the biggest weight to Overseas Shipholding Group, Inc. (NYSE:OSG), around 2.22% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, dishing out 0.29 percent of its 13F equity portfolio to OSG.
Since Overseas Shipholding Group, Inc. (NYSE:OSG) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there were a few hedgies that slashed their entire stakes heading into Q4. At the top of the heap, Vince Maddi and Shawn Brennan’s SIR Capital Management sold off the largest stake of all the hedgies followed by Insider Monkey, worth about $0.1 million in stock, and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dropped about $0 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Overseas Shipholding Group, Inc. (NYSE:OSG) but similarly valued. We will take a look at U.S. Well Services, Inc. (NASDAQ:USWS), The GDL Fund (NYSE:GDL), First Savings Financial Group, Inc. (NASDAQ:FSFG), and LSB Industries, Inc. (NYSE:LXU). This group of stocks’ market caps resemble OSG’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.25 hedge funds with bullish positions and the average amount invested in these stocks was $8 million. That figure was $39 million in OSG’s case. U.S. Well Services, Inc. (NASDAQ:USWS) is the most popular stock in this table. On the other hand The GDL Fund (NYSE:GDL) is the least popular one with only 3 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 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately OSG wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OSG were disappointed as the stock returned 0% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.