Is Orbotech Ltd. (NASDAQ:ORBK) a buy here? Prominent investors are in a pessimistic mood. The number of bullish hedge fund positions decreased by 1 in recent months.
To most stock holders, hedge funds are viewed as underperforming, outdated investment tools of the past. While there are over 8000 funds trading at the moment, we at Insider Monkey choose to focus on the aristocrats of this group, about 450 funds. It is estimated that this group oversees most of the smart money's total capital, and by monitoring their best picks, we have formulated a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we've started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).
Equally as key, bullish insider trading activity is another way to parse down the financial markets. As the old adage goes: there are a variety of motivations for an insider to get rid of shares of his or her company, but just one, very obvious reason why they would buy. Plenty of empirical studies have demonstrated the valuable potential of this tactic if shareholders understand what to do (learn more here).
With these "truths" under our belt, it's important to take a peek at the recent action encompassing Orbotech Ltd. (NASDAQ:ORBK).
At the end of the first quarter, a total of 5 of the hedge funds we track were long in this stock, a change of -17% from the previous quarter. With the smart money's positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their holdings significantly.
Of the funds we track, Michael Kaufman's MAK Capital One had the most valuable position in Orbotech Ltd. (NASDAQ:ORBK), worth close to $43.2 million, accounting for 6.9% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which held a $10 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other hedge funds with similar optimism include Michael Larson's Bill & Melinda Gates Foundation Trust, D. E. Shaw's D E Shaw and John Overdeck and David Siegel's Two Sigma Advisors.
Judging by the fact that Orbotech Ltd. (NASDAQ:ORBK) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there were a few funds who sold off their full holdings heading into Q2. Interestingly, Ken Griffin's Citadel Investment Group sold off the largest investment of all the hedgies we monitor, totaling an estimated $0.1 million in stock. These moves are important to note, as total hedge fund interest fell by 1 funds heading into Q2.
Insider trading activity, especially when it's bullish, is at its handiest when the company in focus has experienced transactions within the past six months. Over the last 180-day time frame, Orbotech Ltd. (NASDAQ:ORBK) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).
Let's also review hedge fund and insider activity in other stocks similar to Orbotech Ltd. (NASDAQ:ORBK). These stocks are Nam Tai Electronics, Inc. (NYSE:NTE), CTS Corporation (NYSE:CTS), Power One Inc (NASDAQ:PWER), Silicon Motion Technology Corp. (ADR) (NASDAQ:SIMO), and Methode Electronics Inc. (NYSE:MEI). All of these stocks are in the diversified electronics industry and their market caps are similar to ORBK's market cap.