What Hedge Funds Think About Oaktree Capital Group LLC (OAK)?

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make a proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Is Oaktree Capital Group LLC (NYSE:OAK) undervalued? Prominent investors are taking a bearish view. The number of bullish hedge fund positions stayed the same which is a slightly negative development in our experience. Oaktree Capital Group LLC (NYSE:OAK) was in 13 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with Oaktree Capital Group LLC (NYSE:OAK) positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Fortune Brands Home & Security Inc (NYSE:FBHS), Buckeye Partners, L.P. (NYSE:BPL), and iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB) to gather more data points.

Follow Brookfield Oaktree Holdings Llc (NYSE:OAK-PA)

To most stock holders, hedge funds are assumed to be unimportant, old financial tools of the past. While there are greater than 8000 funds in operation at present, our experts hone in on the bigwigs of this club, about 700 funds. These hedge fund managers administer the majority of all hedge funds’ total capital, and by keeping an eye on their best picks, Insider Monkey has deciphered a number of investment strategies that have historically outstripped the market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, let’s check out the latest action regarding Oaktree Capital Group LLC (NYSE:OAK).

How have hedgies been trading Oaktree Capital Group LLC (NYSE:OAK)?

Heading into Q4, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, flat over the last quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Russell Hawkins’ Hawkins Capital has the biggest position in Oaktree Capital Group LLC (NYSE:OAK), worth close to $33 million, accounting for 15.4% of its total 13F portfolio. The second most bullish fund manager is Horizon Asset Management, managed by Murray Stahl, which holds an $26.3 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism comprise Tom Gayner’s Markel Gayner Asset Management, Mark Travis’s Intrepid Capital Management and Chuck Royce’s Royce & Associates.

Seeing as Oaktree Capital Group LLC (NYSE:OAK) has witnessed a declination in interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds that elected to cut their positions entirely in the third quarter. Interestingly, Wojciech Uzdelewicz’s Espalier Global Management dropped the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $0.9 million in call options. Matthew Hulsizer’s fund, PEAK6 Capital Management, also said goodbye to its call options, about $37,000 worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Oaktree Capital Group LLC (NYSE:OAK) but similarly valued. These stocks are Fortune Brands Home & Security Inc (NYSE:FBHS), Buckeye Partners, L.P. (NYSE:BPL), iShares NASDAQ Biotechnology Index (ETF) (NASDAQ:IBB), and AerCap Holdings N.V. (NYSE:AER). This group of stocks’ market values matches OAK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FBHS 18 213796 4
BPL 15 71831 4
IBB 19 321116 8
AER 77 2994191 0

As you can see, these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $900 million. In this way, Oaktree is the least popular stock in this group and the funds held $120 million worth of its stock at the end of September, significantly below the average value. Therefore, it seems that hedge funds are not fond of Oaktree Capital and it may be a signal that you should stay away from it for now. Nevertheless, hedge funds may not be very familiar with the bullish thesis on this stock and a more detailed analysis is required in order to assess its future trajectory.