Should You Avoid Olympic Steel, Inc. (ZEUS)?

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Olympic Steel, Inc. (NASDAQ:ZEUS) in this article.

Olympic Steel, Inc. (NASDAQ:ZEUS) shareholders have witnessed a decrease in enthusiasm from smart money lately. Our calculations also showed that ZEUS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In today’s marketplace there are plenty of indicators market participants can use to appraise their stock investments. A pair of the less utilized indicators are hedge fund and insider trading signals. Our experts have shown that, historically, those who follow the best picks of the best hedge fund managers can outperform the market by a very impressive margin (see the details here).

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

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 as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a peek at the fresh hedge fund action surrounding Olympic Steel, Inc. (NASDAQ:ZEUS).

How have hedgies been trading Olympic Steel, Inc. (NASDAQ:ZEUS)?

At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -22% from the second quarter of 2019. On the other hand, there were a total of 7 hedge funds with a bullish position in ZEUS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Olympic Steel, Inc. (NASDAQ:ZEUS) was held by D E Shaw, which reported holding $1.1 million worth of stock at the end of September. It was followed by Ancora Advisors with a $0.8 million position. Other investors bullish on the company included Royce & Associates, AQR Capital Management, and Tudor Investment Corp. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Olympic Steel, Inc. (NASDAQ:ZEUS), around 0.21% of its 13F portfolio. Ancora Advisors is also relatively very bullish on the stock, earmarking 0.04 percent of its 13F equity portfolio to ZEUS.

Seeing as Olympic Steel, Inc. (NASDAQ:ZEUS) has experienced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies that decided to sell off their full holdings by the end of the third quarter. Interestingly, David Harding’s Winton Capital Management said goodbye to the biggest stake of the 750 funds followed by Insider Monkey, comprising about $0.7 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund dropped about $0.6 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 2 funds by the end of the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Olympic Steel, Inc. (NASDAQ:ZEUS) but similarly valued. We will take a look at Vitamin Shoppe Inc (NYSE:VSI), Marrone Bio Innovations Inc (NASDAQ:MBII), First United Corp (NASDAQ:FUNC), and Avadel Pharmaceuticals plc (NASDAQ:AVDL). This group of stocks’ market values match ZEUS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VSI 12 38820 1
MBII 2 14993 -1
FUNC 6 16016 0
AVDL 7 30296 2
Average 6.75 25031 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $4 million in ZEUS’s case. Vitamin Shoppe Inc (NYSE:VSI) is the most popular stock in this table. On the other hand Marrone Bio Innovations Inc (NASDAQ:MBII) is the least popular one with only 2 bullish hedge fund positions. Olympic Steel, Inc. (NASDAQ:ZEUS) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on ZEUS as the stock returned 16.5% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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