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Hedge Fund Sentiment Is Stagnant On Orchid Island Capital, Inc. (ORC)

Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 26% in 2019 (through November 22nd). Conversely, hedge funds’ 20 preferred S&P 500 stocks generated a return of nearly 35% during the same period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Orchid Island Capital, Inc. (NYSE:ORC).

Hedge fund interest in Orchid Island Capital, Inc. (NYSE:ORC) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ImmunoGen, Inc. (NASDAQ:IMGN), Westport Fuel Systems Inc. (NASDAQ:WPRT), and Exantas Capital Corp. (NYSE:XAN) to gather more data points. Our calculations also showed that ORC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most shareholders, hedge funds are seen as slow, old financial vehicles of years past. While there are over 8000 funds in operation at the moment, Our researchers hone in on the elite of this club, about 750 funds. These money managers orchestrate the lion’s share of the hedge fund industry’s total asset base, and by keeping track of their first-class investments, Insider Monkey has identified various investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

David Harding

David Harding of Winton Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now we’re going to take a gander at the fresh hedge fund action surrounding Orchid Island Capital, Inc. (NYSE:ORC).

What have hedge funds been doing with Orchid Island Capital, Inc. (NYSE:ORC)?

At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 2 hedge funds with a bullish position in ORC a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the most valuable position in Orchid Island Capital, Inc. (NYSE:ORC), worth close to $10.6 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Winton Capital Management, led by David Harding, holding a $3.1 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and . In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Orchid Island Capital, Inc. (NYSE:ORC), around 0.04% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to ORC.

Since Orchid Island Capital, Inc. (NYSE:ORC) has witnessed bearish sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedge funds that elected to cut their full holdings by the end of the third quarter. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the biggest stake of the “upper crust” of funds tracked by Insider Monkey, comprising close to $0.4 million in stock. David E. Shaw’s fund, D E Shaw, also said goodbye to its stock, about $0.1 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Orchid Island Capital, Inc. (NYSE:ORC) but similarly valued. We will take a look at ImmunoGen, Inc. (NASDAQ:IMGN), Westport Fuel Systems Inc. (NASDAQ:WPRT), Exantas Capital Corp. (NYSE:XAN), and Camtek LTD. (NASDAQ:CAMT). All of these stocks’ market caps are closest to ORC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IMGN 11 71455 -4
WPRT 13 38865 0
XAN 15 67814 -1
CAMT 10 24660 0
Average 12.25 50699 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $14 million in ORC’s case. Exantas Capital Corp. (NYSE:XAN) is the most popular stock in this table. On the other hand Camtek LTD. (NASDAQ:CAMT) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Orchid Island Capital, Inc. (NYSE:ORC) is even less popular than CAMT. Hedge funds dodged a bullet by taking a bearish stance towards ORC. Our calculations showed that the top 20 most popular hedge fund stocks returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ORC wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ORC investors were disappointed as the stock returned 1.6% during the fourth quarter (through the end of November) 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 70 percent of these stocks already outperformed the market so far in Q4.

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

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