Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Oportun Financial Corporation (NASDAQ:OPRT).
Oportun Financial Corporation (NASDAQ:OPRT) shareholders have witnessed an increase in hedge fund sentiment recently. Our calculations also showed that OPRT 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.
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 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 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_27480" align="aligncenter" width="450"] Israel Englander of Millennium Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We're going to take a look at the new hedge fund action surrounding Oportun Financial Corporation (NASDAQ:OPRT).
How are hedge funds trading Oportun Financial Corporation (NASDAQ:OPRT)?
At Q3's end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12 from one quarter earlier. The graph below displays the number of hedge funds with bullish position in OPRT over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Alyeska Investment Group held the most valuable stake in Oportun Financial Corporation (NASDAQ:OPRT), which was worth $4.5 million at the end of the third quarter. On the second spot was Mendon Capital Advisors which amassed $2.2 million worth of shares. Millennium Management, Ellington, and Shoals Capital Management 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 Shoals Capital Management allocated the biggest weight to Oportun Financial Corporation (NASDAQ:OPRT), around 2.6% of its 13F portfolio. Mendon Capital Advisors is also relatively very bullish on the stock, setting aside 0.37 percent of its 13F equity portfolio to OPRT.
As one would reasonably expect, specific money managers were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, created the biggest position in Oportun Financial Corporation (NASDAQ:OPRT). Alyeska Investment Group had $4.5 million invested in the company at the end of the quarter. Anton Schutz's Mendon Capital Advisors also made a $2.2 million investment in the stock during the quarter. The other funds with brand new OPRT positions are Israel Englander's Millennium Management, Mike Vranos's Ellington, and Jeffrey Hinkle's Shoals Capital Management.
Let's also examine hedge fund activity in other stocks similar to Oportun Financial Corporation (NASDAQ:OPRT). These stocks are Gulfport Energy Corporation (NASDAQ:GPOR), Intrepid Potash, Inc. (NYSE:IPI), Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB), and Weidai Ltd. (NYSE:WEI). This group of stocks' market values are similar to OPRT's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GPOR,14,72978,-3 IPI,14,20221,-2 RRGB,15,46746,3 WEI,1,240,0 Average,11,35046,-0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $19 million in OPRT's case. Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is the most popular stock in this table. On the other hand Weidai Ltd. (NYSE:WEI) is the least popular one with only 1 bullish hedge fund positions. Oportun Financial Corporation (NASDAQ:OPRT) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on OPRT as the stock returned 30.6% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.