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Should I Avoid O-I Glass, Inc. (OI)?

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 O-I Glass, Inc. (NYSE:OI) and determine whether the smart money was really smart about this stock.

Is O-I Glass, Inc. (NYSE:OI) a cheap investment today? Money managers were reducing their bets on the stock. The number of long hedge fund positions went down by 4 recently. O-I Glass, Inc. (NYSE:OI) was in 25 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 30. Our calculations also showed that OI 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).

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.

David Abrams

David Abrams of Abrams Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to go over the new hedge fund action regarding O-I Glass, Inc. (NYSE:OI).

How are hedge funds trading O-I Glass, Inc. (NYSE:OI)?

At the end of the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards OI over the last 20 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Abrams Capital Management was the largest shareholder of O-I Glass, Inc. (NYSE:OI), with a stake worth $62.3 million reported as of the end of September. Trailing Abrams Capital Management was Lyrical Asset Management, which amassed a stake valued at $55.7 million. Atlantic Investment Management, Contrarius Investment Management, and D E Shaw 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 O-I Glass, Inc. (NYSE:OI), around 22.61% of its 13F portfolio. Contrarius Investment Management is also relatively very bullish on the stock, designating 2.71 percent of its 13F equity portfolio to OI.

Judging by the fact that O-I Glass, Inc. (NYSE:OI) has experienced declining sentiment from the smart money, logic holds that there was a specific group of hedge funds who sold off their entire stakes by the end of the second quarter. It’s worth mentioning that Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $43.5 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund said goodbye to about $6.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds by the end of the second quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as O-I Glass, Inc. (NYSE:OI) but similarly valued. We will take a look at Sapiens International Corporation N.V. (NASDAQ:SPNS), Cytokinetics, Inc. (NASDAQ:CYTK), Avanos Medical, Inc. (NYSE:AVNS), Aurora Cannabis Inc. (NYSE:ACB), Silk Road Medical, Inc. (NASDAQ:SILK), Renasant Corporation (NASDAQ:RNST), Knowles Corp (NYSE:KN). This group of stocks’ market valuations resemble OI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPNS 6 43003 -4
CYTK 26 391206 4
AVNS 15 168412 -1
ACB 10 42330 1
SILK 20 103752 8
RNST 10 8447 -2
KN 24 236994 4
Average 15.9 142021 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.9 hedge funds with bullish positions and the average amount invested in these stocks was $142 million. That figure was $243 million in OI’s case. Cytokinetics, Inc. (NASDAQ:CYTK) is the most popular stock in this table. On the other hand Sapiens International Corporation N.V. (NASDAQ:SPNS) is the least popular one with only 6 bullish hedge fund positions. O-I Glass, Inc. (NYSE:OI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OI is 73.5. 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. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on OI as the stock returned 12.2% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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