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In this article we will check out the progression of hedge fund sentiment towards Orrstown Financial Services (NASDAQ:ORRF) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Orrstown Financial Services (NASDAQ:ORRF) was in 3 hedge funds' portfolios at the end of March. ORRF investors should be aware of an increase in enthusiasm from smart money lately. There were 2 hedge funds in our database with ORRF positions at the end of the previous quarter. Our calculations also showed that ORRF 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 44 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Jim Simons of Renaissance Technologies[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital's Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's go over the latest hedge fund action encompassing Orrstown Financial Services (NASDAQ:ORRF).
What does smart money think about Orrstown Financial Services (NASDAQ:ORRF)?
At Q1's end, a total of 3 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 50% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in ORRF a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Orrstown Financial Services (NASDAQ:ORRF), which was worth $3.9 million at the end of the third quarter. On the second spot was EJF Capital which amassed $2.9 million worth of shares. Fourthstone LLC 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 EJF Capital allocated the biggest weight to Orrstown Financial Services (NASDAQ:ORRF), around 0.6% of its 13F portfolio. Fourthstone LLC is also relatively very bullish on the stock, designating 0.2 percent of its 13F equity portfolio to ORRF.
As aggregate interest increased, key money managers have jumped into Orrstown Financial Services (NASDAQ:ORRF) headfirst. Fourthstone LLC, managed by Phil Stone, initiated the largest position in Orrstown Financial Services (NASDAQ:ORRF). Fourthstone LLC had $0.2 million invested in the company at the end of the quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Orrstown Financial Services (NASDAQ:ORRF) but similarly valued. These stocks are CalAmp Corp. (NASDAQ:CAMP), Pacific City Financial Corporation (NASDAQ:PCB), OncoCyte Corporation (NYSE:OCX), and Chemung Financial Corp. (NASDAQ:CHMG). This group of stocks' market valuations are closest to ORRF's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CAMP,12,93779,3 PCB,6,12407,0 OCX,5,48092,1 CHMG,3,9092,0 Average,6.5,40843,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $7 million in ORRF's case. CalAmp Corp. (NASDAQ:CAMP) is the most popular stock in this table. On the other hand Chemung Financial Corp. (NASDAQ:CHMG) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Orrstown Financial Services (NASDAQ:ORRF) is even less popular than CHMG. Hedge funds dodged a bullet by taking a bearish stance towards ORRF. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd but managed to beat the market by 15.6 percentage points. Unfortunately ORRF wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ORRF investors were disappointed as the stock returned -9.6% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.