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Were Hedge Funds Right About Souring On ORBCOMM Inc (ORBC)?

Reymerlyn Martin

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of ORBCOMM Inc (NASDAQ:ORBC).

Is ORBCOMM Inc (NASDAQ:ORBC) a buy, sell, or hold? Prominent investors are selling. The number of bullish hedge fund positions shrunk by 3 in recent months. Our calculations also showed that ORBC isn't among the 30 most popular stocks among hedge funds (see the video below). ORBC was in 13 hedge funds' portfolios at the end of the second quarter of 2019. There were 16 hedge funds in our database with ORBC holdings at the end of the previous quarter. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let's check out the latest hedge fund action surrounding ORBCOMM Inc (NASDAQ:ORBC).

How are hedge funds trading ORBCOMM Inc (NASDAQ:ORBC)?

At the end of the second quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ORBC over the last 16 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

ORBC_nov2019

More specifically, Adage Capital Management was the largest shareholder of ORBCOMM Inc (NASDAQ:ORBC), with a stake worth $56.9 million reported as of the end of March. Trailing Adage Capital Management was Ariel Investments, which amassed a stake valued at $14.6 million. Impax Asset Management, Royce & Associates, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Judging by the fact that ORBCOMM Inc (NASDAQ:ORBC) has experienced falling interest from hedge fund managers, we can see that there is a sect of funds that slashed their positions entirely by the end of the second quarter. Interestingly, William C. Martin's Raging Capital Management said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, comprising close to $6.8 million in stock. James Thomas Berylson's fund, Berylson Capital Partners, also sold off its stock, about $2.1 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 3 funds by the end of the second quarter.

Let's check out 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 ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS), America's Car-Mart, Inc. (NASDAQ:CRMT), Textainer Group Holdings Limited (NYSE:TGH), and Independence Holding Company (NYSE:IHC). All of these stocks' market caps are similar to ORBC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IMOS,2,23209,0 CRMT,23,84560,3 TGH,7,17426,-3 IHC,3,15915,1 Average,8.75,35278,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $87 million in ORBC's case. America's Car-Mart, Inc. (NASDAQ:CRMT) is the most popular stock in this table. On the other hand ChipMOS Technologies (Bermuda) Ltd (NASDAQ:IMOS) is the least popular one with only 2 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -34.3% during the third quarter 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.

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