Do Hedge Funds Really Like Orchard Therapeutics plc (ORTX)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Orchard Therapeutics plc (NASDAQ:ORTX) based on that data and determine whether they were really smart about the stock.

Orchard Therapeutics plc (NASDAQ:ORTX) has experienced an increase in enthusiasm from smart money of late. Orchard Therapeutics plc (NASDAQ:ORTX) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistics is 22. There were 19 hedge funds in our database with ORTX positions at the end of the first quarter. Our calculations also showed that ORTX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Flynn Deerfield Management

James E. Flynn of Deerfield Management

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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a gander at the new hedge fund action surrounding Orchard Therapeutics plc (NASDAQ:ORTX).

What does smart money think about Orchard Therapeutics plc (NASDAQ:ORTX)?

At the end of June, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in ORTX over the last 20 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

Is ORTX A Good Stock To Buy?

More specifically, RA Capital Management was the largest shareholder of Orchard Therapeutics plc (NASDAQ:ORTX), with a stake worth $45.7 million reported as of the end of September. Trailing RA Capital Management was Deerfield Management, which amassed a stake valued at $43.6 million. Adage Capital Management, Casdin Capital, and Citadel Investment Group 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 Deerfield Management allocated the biggest weight to Orchard Therapeutics plc (NASDAQ:ORTX), around 1.27% of its 13F portfolio. RA Capital Management is also relatively very bullish on the stock, designating 0.89 percent of its 13F equity portfolio to ORTX.

As one would reasonably expect, key hedge funds have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the largest position in Orchard Therapeutics plc (NASDAQ:ORTX). Millennium Management had $1.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $0.4 million position during the quarter. The following funds were also among the new ORTX investors: Parvinder Thiara’s Athanor Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Orchard Therapeutics plc (NASDAQ:ORTX) but similarly valued. These stocks are Community Trust Bancorp, Inc. (NASDAQ:CTBI), America’s Car-Mart, Inc. (NASDAQ:CRMT), Amerant Bancorp Inc. (NASDAQ:AMTB), Lakeland Bancorp, Inc. (NASDAQ:LBAI), Seacor Holdings, Inc. (NYSE:CKH), HomeStreet Inc (NASDAQ:HMST), and Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX). This group of stocks’ market values are similar to ORTX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTBI 8 14116 2
CRMT 14 67937 4
AMTB 2 5339 0
LBAI 13 28524 3
CKH 8 82355 -1
HMST 13 38190 0
CRNX 18 251100 7
Average 10.9 69652 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.9 hedge funds with bullish positions and the average amount invested in these stocks was $70 million. That figure was $150 million in ORTX’s case. Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX) is the most popular stock in this table. On the other hand Amerant Bancorp Inc. (NASDAQ:AMTB) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Orchard Therapeutics plc (NASDAQ:ORTX) is more popular among hedge funds. Our overall hedge fund sentiment score for ORTX is 33.3. 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 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 24.8% in 2020 through the end of September and still beat the market by 19.3 percentage points. Unfortunately ORTX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ORTX were disappointed as the stock returned -31.5% 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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