Do Hedge Funds Love Oxford Square Capital Corp. (OXSQ)?

·6 min read

The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Oxford Square Capital Corp. (NASDAQ:OXSQ).

Is Oxford Square Capital Corp. (NASDAQ:OXSQ) a buy right now? The best stock pickers were in a bullish mood. The number of bullish hedge fund bets improved by 1 in recent months. Oxford Square Capital Corp. (NASDAQ:OXSQ) was in 3 hedge funds' portfolios at the end of September. The all time high for this statistics is 10. Our calculations also showed that OXSQ isn't among the 30 most popular stocks among hedge funds (click for Q3 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 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma
John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. 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. Now let's analyze the new hedge fund action surrounding Oxford Square Capital Corp. (NASDAQ:OXSQ).

How are hedge funds trading Oxford Square Capital Corp. (NASDAQ:OXSQ)?

At the end of September, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards OXSQ over the last 21 quarters. With hedgies' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

More specifically, Arrowstreet Capital was the largest shareholder of Oxford Square Capital Corp. (NASDAQ:OXSQ), with a stake worth $1.3 million reported as of the end of September. Trailing Arrowstreet Capital was Two Sigma Advisors, which amassed a stake valued at $0.6 million. ExodusPoint Capital was 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 ExodusPoint Capital allocated the biggest weight to Oxford Square Capital Corp. (NASDAQ:OXSQ), around 0.0023% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, dishing out 0.0021 percent of its 13F equity portfolio to OXSQ.

As industrywide interest jumped, some big names were breaking ground themselves. ExodusPoint Capital, managed by Michael Gelband, established the most outsized position in Oxford Square Capital Corp. (NASDAQ:OXSQ). ExodusPoint Capital had $0.1 million invested in the company at the end of the quarter.

Let's check out hedge fund activity in other stocks similar to Oxford Square Capital Corp. (NASDAQ:OXSQ). These stocks are Cidara Therapeutics Inc (NASDAQ:CDTX), Intellicheck Inc. (NASDAQ:IDN), Security National Financial Corp. (NASDAQ:SNFCA), First Business Financial Services Inc (NASDAQ:FBIZ), First Bank (NASDAQ:FRBA), The Eastern Company (NASDAQ:EML), and 1st Constitution Bancorp (NASDAQ:FCCY). This group of stocks' market caps are closest to OXSQ's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CDTX,8,22230,2 IDN,1,226,-3 SNFCA,2,1583,0 FBIZ,2,3630,-2 FRBA,6,3211,0 EML,5,33660,0 FCCY,2,1575,1 Average,3.7,9445,-0.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.7 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $2 million in OXSQ's case. Cidara Therapeutics Inc (NASDAQ:CDTX) is the most popular stock in this table. On the other hand Intellicheck Inc. (NASDAQ:IDN) is the least popular one with only 1 bullish hedge fund positions. Oxford Square Capital Corp. (NASDAQ:OXSQ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OXSQ is 29.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and still beat the market by 15.4 percentage points. A small number of hedge funds were also right about betting on OXSQ as the stock returned 22.1% since the end of the third quarter (through 11/23) and outperformed the market by an even larger margin.

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

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