"The global economic environment is very favorable for investors. Economies are generally strong, but not too strong. Employment levels are among the strongest for many decades. Interest rates are paused at very low levels, and the risk of significant increases in the medium term seems low. Financing for transactions is freely available to good borrowers, but not in major excess. Covenants are lighter than they were five years ago, but the extreme excesses seen in the past do not seem prevalent yet today. Despite this apparent ‘goldilocks’ market environment, we continue to worry about a world where politics are polarized almost everywhere, interest rates are low globally, and equity valuations are at their peak," are the words of Brookfield Asset Management. Brookfield was right about politics as stocks experienced their second worst May since the 1960s due to escalation of trade disputes. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards OSI Systems, Inc. (NASDAQ:OSIS) and see how it was affected.
Is OSI Systems, Inc. (NASDAQ:OSIS) a first-rate investment now? Investors who are in the know are taking a bullish view. The number of long hedge fund bets improved by 9 in recent months. Our calculations also showed that OSIS isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are dozens of tools market participants use to analyze publicly traded companies. A couple of the best tools are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the top investment managers can beat the market by a significant amount (see the details here).
[caption id="attachment_26794" align="aligncenter" width="359"] Paul Tudor Jones of Tudor Investment Corp[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to take a glance at the new hedge fund action regarding OSI Systems, Inc. (NASDAQ:OSIS).
Hedge fund activity in OSI Systems, Inc. (NASDAQ:OSIS)
At the end of the third quarter, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 69% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in OSIS a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in OSI Systems, Inc. (NASDAQ:OSIS) was held by Arrowstreet Capital, which reported holding $35 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $30.1 million position. Other investors bullish on the company included Intrinsic Edge Capital, Select Equity Group, and Millennium Management. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to OSI Systems, Inc. (NASDAQ:OSIS), around 2.17% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, setting aside 2.08 percent of its 13F equity portfolio to OSIS.
Now, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the most outsized position in OSI Systems, Inc. (NASDAQ:OSIS). Millennium Management had $16.2 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also initiated a $14.7 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace's Marshall Wace, David E. Shaw's D E Shaw, and Paul Tudor Jones's Tudor Investment Corp.
Let's now review hedge fund activity in other stocks similar to OSI Systems, Inc. (NASDAQ:OSIS). These stocks are Knowles Corp (NYSE:KN), Columbia Financial, Inc. (NASDAQ:CLBK), First Majestic Silver Corp (NYSE:AG), and TransAlta Corporation (NYSE:TAC). This group of stocks' market valuations are closest to OSIS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KN,26,264352,4 CLBK,10,38284,-2 AG,14,33132,5 TAC,7,30962,-2 Average,14.25,91683,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $92 million. That figure was $180 million in OSIS's case. Knowles Corp (NYSE:KN) is the most popular stock in this table. On the other hand TransAlta Corporation (NYSE:TAC) is the least popular one with only 7 bullish hedge fund positions. OSI Systems, Inc. (NASDAQ:OSIS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 OSIS wasn't nearly as popular as these 20 stocks and hedge funds that were betting on OSIS were disappointed as the stock returned -2% during the fourth quarter (through the end of November) 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 this year.
Disclosure: None. This article was originally published at Insider Monkey.