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Did Hedge Funds Make The Right Call On Orthofix Medical Inc (OFIX) ?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Orthofix Medical Inc (NASDAQ:OFIX) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Orthofix Medical Inc (NASDAQ:OFIX) has experienced an increase in support from the world’s most elite money managers recently. Our calculations also showed that OFIX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most shareholders, hedge funds are perceived as unimportant, outdated investment tools of years past. While there are more than 8000 funds with their doors open at the moment, Our experts look at the leaders of this group, approximately 850 funds. These hedge fund managers have their hands on most of the smart money’s total asset base, and by observing their highest performing picks, Insider Monkey has spotted a number of investment strategies that have historically outrun the broader indices. Insider Monkey’s flagship short hedge fund strategy outpaced the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s take a gander at the recent hedge fund action surrounding Orthofix Medical Inc (NASDAQ:OFIX).

What have hedge funds been doing with Orthofix Medical Inc (NASDAQ:OFIX)?

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OFIX over the last 18 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is OFIX A Good Stock To Buy?

The largest stake in Orthofix Medical Inc (NASDAQ:OFIX) was held by Paradice Investment Management, which reported holding $29.5 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $12.9 million position. Other investors bullish on the company included Royce & Associates, GLG Partners, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to Orthofix Medical Inc (NASDAQ:OFIX), around 3.27% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, earmarking 0.83 percent of its 13F equity portfolio to OFIX.

As one would reasonably expect, specific money managers were breaking ground themselves. Engineers Gate Manager, managed by Greg Eisner, initiated the most outsized position in Orthofix Medical Inc (NASDAQ:OFIX). Engineers Gate Manager had $0.9 million invested in the company at the end of the quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Orthofix Medical Inc (NASDAQ:OFIX) but similarly valued. These stocks are ACM Research, Inc. (NASDAQ:ACMR), Banco BBVA Argentina S.A. (NYSE:BBAR), Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), and Universal Electronics Inc (NASDAQ:UEIC). All of these stocks’ market caps are closest to OFIX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACMR 10 43651 0
BBAR 8 4407 -1
GLDD 20 78403 -5
UEIC 13 21742 1
Average 12.75 37051 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $78 million in OFIX’s case. Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) is the most popular stock in this table. On the other hand Banco BBVA Argentina S.A. (NYSE:BBAR) is the least popular one with only 8 bullish hedge fund positions. Orthofix Medical Inc (NASDAQ:OFIX) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately OFIX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on OFIX were disappointed as the stock returned 13.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.