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Hedge Fund Sentiment Is Stagnant On ORIX Corporation (IX)

Reymerlyn Martin

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 proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund managers like Jeff Ubben, George Soros and Seth Klarman 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.

ORIX Corporation (NYSE:IX) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 6 hedge funds' portfolios at the end of June. At the end of this article we will also compare IX to other stocks including KLA Corporation (NASDAQ:KLAC), Splunk Inc (NASDAQ:SPLK), and Rockwell Automation Inc. (NYSE:ROK) to get a better sense of its popularity. Our calculations also showed that IX isn't among the 30 most popular stocks among hedge funds (see the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the eyes of most traders, hedge funds are perceived as underperforming, outdated financial vehicles of years past. While there are more than 8000 funds with their doors open at the moment, Our researchers choose to focus on the crème de la crème of this club, about 750 funds. These money managers command most of the smart money's total capital, and by monitoring their unrivaled picks, Insider Monkey has formulated numerous investment strategies that have historically outpaced the market. Insider Monkey's flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

John Overdeck of Two Sigma

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We're going to view the latest hedge fund action surrounding ORIX Corporation (NYSE:IX).

What does smart money think about ORIX Corporation (NYSE:IX)?

At the end of the second quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in IX over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

IX_oct2019

Of the funds tracked by Insider Monkey, D E Shaw, managed by D. E. Shaw, holds the largest position in ORIX Corporation (NYSE:IX). D E Shaw has a $6.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On D E Shaw's heels is Paul Marshall and Ian Wace of Marshall Wace LLP, with a $2.7 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism comprise Renaissance Technologies, John Overdeck and David Siegel's Two Sigma Advisors and Israel Englander's Millennium Management.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Arrowstreet Capital. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as ORIX Corporation (NYSE:IX) but similarly valued. These stocks are KLA Corporation (NASDAQ:KLAC), Splunk Inc (NASDAQ:SPLK), Rockwell Automation Inc. (NYSE:ROK), and CGI Inc. (NYSE:GIB). All of these stocks' market caps are closest to IX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KLAC,24,504403,-17 SPLK,25,206778,-4 ROK,31,423135,3 GIB,14,311851,-4 Average,23.5,361542,-5.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $13 million in IX's case. Rockwell Automation Inc. (NYSE:ROK) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks ORIX Corporation (NYSE:IX) is even less popular than GIB. Hedge funds dodged a bullet by taking a bearish stance towards IX. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately IX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IX investors were disappointed as the stock returned 0.4% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.

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

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