We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Peltz's recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards ORBCOMM Inc (NASDAQ:ORBC).
ORBCOMM Inc (NASDAQ:ORBC) investors should be aware of an increase in hedge fund interest lately. Our calculations also showed that ORBC 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' 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_340081" align="aligncenter" width="450"] Phill Gross of Adage Capital Management[/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 review the recent hedge fund action regarding ORBCOMM Inc (NASDAQ:ORBC).
How are hedge funds trading ORBCOMM Inc (NASDAQ:ORBC)?
Heading into the fourth quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 8% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ORBC over the last 17 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Adage Capital Management was the largest shareholder of ORBCOMM Inc (NASDAQ:ORBC), with a stake worth $37.9 million reported as of the end of September. Trailing Adage Capital Management was Ariel Investments, which amassed a stake valued at $9.9 million. Impax Asset Management, Millennium Management, and Royce & Associates 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 Ariel Investments allocated the biggest weight to ORBCOMM Inc (NASDAQ:ORBC), around 0.13% of its 13F portfolio. Adage Capital Management is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to ORBC.
Consequently, key hedge funds have been driving this bullishness. Winton Capital Management, managed by David Harding, established the largest position in ORBCOMM Inc (NASDAQ:ORBC). Winton Capital Management had $0.6 million invested in the company at the end of the quarter. Mike Vranos's Ellington also made a $0.1 million investment in the stock during the quarter. The following funds were also among the new ORBC investors: David E. Shaw's D E Shaw and Noam Gottesman's GLG Partners.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as ORBCOMM Inc (NASDAQ:ORBC) but similarly valued. We will take a look at Cross Country Healthcare, Inc. (NASDAQ:CCRN), NI Holdings, Inc. (NASDAQ:NODK), CAI International Inc (NYSE:CAI), and Del Taco Restaurants Inc (NASDAQ:TACO). This group of stocks' market valuations are similar to ORBC's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CCRN,14,31200,6 NODK,7,26044,1 CAI,12,106428,-2 TACO,13,29666,1 Average,11.5,48335,1.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $48 million. That figure was $63 million in ORBC's case. Cross Country Healthcare, Inc. (NASDAQ:CCRN) is the most popular stock in this table. On the other hand NI Holdings, Inc. (NASDAQ:NODK) is the least popular one with only 7 bullish hedge fund positions. ORBCOMM Inc (NASDAQ:ORBC) 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 ORBC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ORBC were disappointed as the stock returned -15.8% 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.