Is Ormat Technologies, Inc. (NYSE:ORA) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is Ormat Technologies, Inc. (NYSE:ORA) a buy, sell, or hold? Investors who are in the know are in an optimistic mood. The number of bullish hedge fund bets went up by 7 recently. Our calculations also showed that ORA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). ORA was in 16 hedge funds' portfolios at the end of the third quarter of 2019. There were 9 hedge funds in our database with ORA holdings at the end of the previous quarter. Video: Click the image to 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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_746893" align="aligncenter" width="473"] Paul Marshall of Marshall Wace[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's check out the recent hedge fund action surrounding Ormat Technologies, Inc. (NYSE:ORA).
How are hedge funds trading Ormat Technologies, Inc. (NYSE:ORA)?
At Q3's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 78% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ORA over the last 17 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.
More specifically, Impax Asset Management was the largest shareholder of Ormat Technologies, Inc. (NYSE:ORA), with a stake worth $98.8 million reported as of the end of September. Trailing Impax Asset Management was Renaissance Technologies, which amassed a stake valued at $62.8 million. GLG Partners, GAMCO Investors, and Citadel Investment Group 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 Impax Asset Management allocated the biggest weight to Ormat Technologies, Inc. (NYSE:ORA), around 1.29% of its 13F portfolio. Highland Capital Management is also relatively very bullish on the stock, designating 0.08 percent of its 13F equity portfolio to ORA.
Now, key hedge funds were leading the bulls' herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the biggest position in Ormat Technologies, Inc. (NYSE:ORA). Arrowstreet Capital had $2.1 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace also initiated a $1.9 million position during the quarter. The following funds were also among the new ORA investors: Joel Greenblatt's Gotham Asset Management, Ken Griffin's Citadel Investment Group, and Benjamin A. Smith's Laurion Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Ormat Technologies, Inc. (NYSE:ORA) but similarly valued. We will take a look at Eagle Materials, Inc. (NYSE:EXP), Ternium S.A. (NYSE:TX), Cyberark Software Ltd (NASDAQ:CYBR), and DCP Midstream LP (NYSE:DCP). All of these stocks' market caps are similar to ORA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position EXP,36,819307,0 TX,8,52465,-6 CYBR,18,257050,-1 DCP,3,8420,1 Average,16.25,284311,-1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $284 million. That figure was $194 million in ORA's case. Eagle Materials, Inc. (NYSE:EXP) is the most popular stock in this table. On the other hand DCP Midstream LP (NYSE:DCP) is the least popular one with only 3 bullish hedge fund positions. Ormat Technologies, Inc. (NYSE:ORA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ORA wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ORA investors were disappointed as the stock returned 3.6% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.