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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Oric Pharmaceuticals, Inc. (NASDAQ:ORIC).
Is ORIC a good stock to buy now? Prominent investors were in a bearish mood. The number of long hedge fund bets fell by 1 recently. Oric Pharmaceuticals, Inc. (NASDAQ:ORIC) was in 10 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 11. Our calculations also showed that ORIC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 11 hedge funds in our database with ORIC holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Oleg Nodelman of EcoR1 Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let's take a look at the fresh hedge fund action encompassing Oric Pharmaceuticals, Inc. (NASDAQ:ORIC).
Do Hedge Funds Think ORIC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ORIC over the last 21 quarters. With hedgies' sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, OrbiMed Advisors was the largest shareholder of Oric Pharmaceuticals, Inc. (NASDAQ:ORIC), with a stake worth $73.1 million reported as of the end of September. Trailing OrbiMed Advisors was EcoR1 Capital, which amassed a stake valued at $66.1 million. Foresite Capital, Alkeon Capital Management, and Casdin Capital 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 Foresite Capital allocated the biggest weight to Oric Pharmaceuticals, Inc. (NASDAQ:ORIC), around 9.25% of its 13F portfolio. EcoR1 Capital is also relatively very bullish on the stock, dishing out 4.71 percent of its 13F equity portfolio to ORIC.
Since Oric Pharmaceuticals, Inc. (NASDAQ:ORIC) has faced bearish sentiment from the entirety of the hedge funds we track, it's easy to see that there was a specific group of fund managers who were dropping their positions entirely in the third quarter. Interestingly, James E. Flynn's Deerfield Management cut the largest position of all the hedgies watched by Insider Monkey, worth an estimated $10.1 million in stock, and Aaron Cowen's Suvretta Capital Management was right behind this move, as the fund cut about $2.6 million worth. These moves are important to note, as total hedge fund interest was cut by 1 funds in the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Oric Pharmaceuticals, Inc. (NASDAQ:ORIC) but similarly valued. We will take a look at GrowGeneration Corp. (NASDAQ:GRWG), Cincinnati Bell Inc. (NYSE:CBB), First Commonwealth Financial Corporation (NYSE:FCF), Endo International plc (NASDAQ:ENDP), Orion Engineered Carbons SA (NYSE:OEC), Textainer Group Holdings Limited (NYSE:TGH), and Seritage Growth Properties (NYSE:SRG). This group of stocks' market caps are closest to ORIC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position GRWG,10,56404,-1 CBB,16,134906,1 FCF,18,27940,3 ENDP,17,159822,-4 OEC,20,130513,-1 TGH,9,17681,0 SRG,12,126062,-6 Average,14.6,93333,-1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $93 million. That figure was $174 million in ORIC's case. Orion Engineered Carbons SA (NYSE:OEC) is the most popular stock in this table. On the other hand Textainer Group Holdings Limited (NYSE:TGH) is the least popular one with only 9 bullish hedge fund positions. Oric Pharmaceuticals, Inc. (NASDAQ:ORIC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ORIC is 35.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on ORIC as the stock returned 43.9% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.