Overstock.com, Inc. (OSTK): Are Hedge Funds Right About This Stock?
What's a smart Overstock.com, Inc. (NASDAQ:OSTK) investor to do?
Now, according to many traders, hedge funds are assumed to be overrated, outdated financial tools of an era lost to time. Although there are over 8,000 hedge funds trading today, Insider Monkey aim at the moguls of this group, around 525 funds. It is assumed that this group controls most of the hedge fund industry's total assets, and by paying attention to their highest performing picks, we've deciphered a few investment strategies that have historically beaten the S&P 500. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we've began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 33 percentage points in 11 months (see all of our picks from August).
Equally as useful, positive insider trading sentiment is a second way to look at the marketplace. There are a variety of motivations for an executive to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Many empirical studies have demonstrated the impressive potential of this strategy if "monkeys" understand what to do (learn more here).
Furthermore, we're going to examine the latest info about Overstock.com, Inc. (NASDAQ:OSTK).
Hedge fund activity in Overstock.com, Inc. (NASDAQ:OSTK)
At Q2's end, a total of 15 of the hedge funds we track were bullish in this stock, a change of 50% from one quarter earlier. With hedgies' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings meaningfully.
Out of the hedge funds we follow, Fairfax Financial Holdings, managed by Prem Watsa, holds the largest position in Overstock.com, Inc. (NASDAQ:OSTK). Fairfax Financial Holdings has a $89.7 million position in the stock, comprising 3.6% of its 13F portfolio. Sitting at the No. 2 spot is Francis Chou of Chou Associates Management, with a $30.6 million position; the fund has 8.3% of its 13F portfolio invested in the stock. Other hedgies that hold long positions include Jim Simons's Renaissance Technologies, and D. E. Shaw's D E Shaw.
As aggregate interest spiked, particular hedge funds have been driving this bullishness. Fairfax Financial Holdings, managed by Prem Watsa, created the most valuable position in Overstock.com, Inc. (NASDAQ:OSTK). Fairfax Financial Holdings had 89.7 million invested in the company at the end of the quarter. Francis Chou's Chou Associates Management also made a $30.6 million investment in the stock during the quarter. The following funds were also among the new OSTK investors: Jim Simons's Renaissance Technologies, Matthew Hulsizer's PEAK6 Capital Management, and D. E. Shaw's D E Shaw.
How have insiders been trading Overstock.com, Inc. (NASDAQ:OSTK)?
Insider buying made by high-level executives is best served when the company in focus has seen transactions within the past 180 days. Over the last six-month time frame, Overstock.com, Inc. (NASDAQ:OSTK) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).
We'll also take a look at the relationship between both of these indicators in other stocks similar to Overstock.com, Inc. (NASDAQ:OSTK). These stocks are ValueVision Media, Inc. (NASDAQ:VVTV), PC Connection, Inc. (NASDAQ:PCCC), Stamps.com Inc. (NASDAQ:STMP), Vitacost.com, Inc. (NASDAQ:VITC), and E Commerce China Dangdang Inc (ADR) (NYSE:DANG). This group of stocks are in the catalog & mail order houses industry and their market caps are closest to OSTK's market cap.
# of Hedge Funds
# of Insiders Buying
# of Insiders Selling
ValueVision Media, Inc. (NASDAQ:VVTV)
PC Connection, Inc. (NASDAQ:PCCC)
Stamps.com Inc. (NASDAQ:STMP)
Vitacost.com, Inc. (NASDAQ:VITC)
E Commerce China Dangdang Inc (ADR) (NYSE:DANG)
Using the returns shown by our research, average investors should always watch hedge fund and insider trading activity, and Overstock.com, Inc. (NASDAQ:OSTK) shareholders fit into this picture quite nicely.