At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Organogenesis Holdings Inc. (NASDAQ:ORGO).
Organogenesis Holdings Inc. (NASDAQ:ORGO) was in 5 hedge funds' portfolios at the end of the first quarter of 2020. ORGO shareholders have witnessed a decrease in enthusiasm from smart money of late. There were 8 hedge funds in our database with ORGO holdings at the end of the previous quarter. Our calculations also showed that ORGO isn't among the 30 most popular stocks among hedge funds (click for Q1 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 has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 51 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
[caption id="attachment_673876" align="aligncenter" width="399"] John Overdeck of Two Sigma Advisors[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a peek at the fresh hedge fund action surrounding Organogenesis Holdings Inc. (NASDAQ:ORGO).
How have hedgies been trading Organogenesis Holdings Inc. (NASDAQ:ORGO)?
Heading into the second quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -38% from the previous quarter. By comparison, 4 hedge funds held shares or bullish call options in ORGO a year ago. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
The largest stake in Organogenesis Holdings Inc. (NASDAQ:ORGO) was held by Prosight Capital, which reported holding $2.2 million worth of stock at the end of September. It was followed by Millennium Management with a $0.3 million position. Other investors bullish on the company included Renaissance Technologies, Two Sigma Advisors, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Prosight Capital allocated the biggest weight to Organogenesis Holdings Inc. (NASDAQ:ORGO), around 1.01% of its 13F portfolio. Two Sigma Advisors is also relatively very bullish on the stock, designating 0.0007 percent of its 13F equity portfolio to ORGO.
Seeing as Organogenesis Holdings Inc. (NASDAQ:ORGO) has witnessed a decline in interest from hedge fund managers, logic holds that there was a specific group of money managers that slashed their entire stakes by the end of the first quarter. At the top of the heap, Paul Marshall and Ian Wace's Marshall Wace LLP dropped the largest position of the 750 funds monitored by Insider Monkey, worth about $0.2 million in stock. Benjamin A. Smith's fund, Laurion Capital Management, also dumped its stock, about $0.1 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds by the end of the first quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Organogenesis Holdings Inc. (NASDAQ:ORGO) but similarly valued. We will take a look at NGL Energy Partners LP (NYSE:NGL), Select Energy Services, Inc. (NYSE:WTTR), KNOT Offshore Partners LP (NYSE:KNOP), and Hanmi Financial Corp (NASDAQ:HAFC). This group of stocks' market values are similar to ORGO's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NGL,4,3343,0 WTTR,16,18497,0 KNOP,6,20344,1 HAFC,10,19189,-2 Average,9,15343,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $3 million in ORGO's case. Select Energy Services, Inc. (NYSE:WTTR) is the most popular stock in this table. On the other hand NGL Energy Partners LP (NYSE:NGL) is the least popular one with only 4 bullish hedge fund positions. Organogenesis Holdings Inc. (NASDAQ:ORGO) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on ORGO as the stock returned 27.9% during the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.