Coronavirus is probably the #1 concern in investors' minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's analyze whether OGE Energy Corp. (NYSE:OGE) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Hedge fund interest in OGE Energy Corp. (NYSE:OGE) 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 OGE to other stocks including Kilroy Realty Corp (NYSE:KRC), Zions Bancorporation (NASDAQ:ZION), and Ralph Lauren Corporation (NYSE:RL) to get a better sense of its popularity.
In today’s marketplace there are plenty of gauges market participants employ to analyze publicly traded companies. Two of the less utilized gauges are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the elite money managers can beat the market by a significant margin (see the details here).
[caption id="attachment_189632" align="aligncenter" width="400"] David Harding of Winton Capital Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now let's take a look at the recent hedge fund action regarding OGE Energy Corp. (NYSE:OGE).
What does smart money think about OGE Energy Corp. (NYSE:OGE)?
Heading into the first quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 16 hedge funds with a bullish position in OGE a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in OGE Energy Corp. (NYSE:OGE), which was worth $59.5 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $25.2 million worth of shares. Millennium Management, GLG Partners, and Winton 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 Quantamental Technologies allocated the biggest weight to OGE Energy Corp. (NYSE:OGE), around 0.3% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, setting aside 0.18 percent of its 13F equity portfolio to OGE.
Judging by the fact that OGE Energy Corp. (NYSE:OGE) has faced a decline in interest from the smart money, we can see that there is a sect of money managers who sold off their full holdings by the end of the third quarter. Intriguingly, Israel Englander's Millennium Management sold off the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $2.7 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund dropped about $2.7 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's now review hedge fund activity in other stocks similar to OGE Energy Corp. (NYSE:OGE). We will take a look at Kilroy Realty Corp (NYSE:KRC), Zions Bancorporation (NASDAQ:ZION), Ralph Lauren Corporation (NYSE:RL), and Bright Horizons Family Solutions Inc (NYSE:BFAM). This group of stocks' market values match OGE's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KRC,18,182727,-8 ZION,43,597267,13 RL,37,988865,4 BFAM,34,343904,4 Average,33,528191,3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $528 million. That figure was $157 million in OGE's case. Zions Bancorporation (NASDAQ:ZION) is the most popular stock in this table. On the other hand Kilroy Realty Corp (NYSE:KRC) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks OGE Energy Corp. (NYSE:OGE) is even less popular than KRC. Hedge funds dodged a bullet by taking a bearish stance towards OGE. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately OGE wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); OGE investors were disappointed as the stock returned -30.5% 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 20 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in Q1. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
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