Hedge Funds Are Buying OSI Systems, Inc. (OSIS)

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards OSI Systems, Inc. (NASDAQ:OSIS) changed recently.

Is OSI Systems, Inc. (NASDAQ:OSIS) an excellent investment right now? Hedge funds were getting more optimistic. The number of long hedge fund bets inched up by 4 in recent months. OSI Systems, Inc. (NASDAQ:OSIS) was in 20 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 25. Our calculations also showed that OSIS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 16 hedge funds in our database with OSIS holdings at the end of December.

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Now we’re going to take a gander at the recent hedge fund action surrounding OSI Systems, Inc. (NASDAQ:OSIS).

Do Hedge Funds Think OSIS Is A Good Stock To Buy Now?

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 25% from the fourth quarter of 2020. On the other hand, there were a total of 15 hedge funds with a bullish position in OSIS a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Cardinal Capital held the most valuable stake in OSI Systems, Inc. (NASDAQ:OSIS), which was worth $26.9 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $13.5 million worth of shares. Millennium Management, Renaissance Technologies, and Intrinsic Edge Capital 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 Zebra Capital Management allocated the biggest weight to OSI Systems, Inc. (NASDAQ:OSIS), around 0.73% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, designating 0.66 percent of its 13F equity portfolio to OSIS.

As one would reasonably expect, key hedge funds have been driving this bullishness. Intrinsic Edge Capital, managed by Mark Coe, initiated the largest position in OSI Systems, Inc. (NASDAQ:OSIS). Intrinsic Edge Capital had $8.2 million invested in the company at the end of the quarter. Charles Paquelet’s Skylands Capital also initiated a $1.7 million position during the quarter. The other funds with new positions in the stock are Noam Gottesman’s GLG Partners, Blair Baker’s Precept Capital Management, and Donald Sussman’s Paloma Partners.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as OSI Systems, Inc. (NASDAQ:OSIS) but similarly valued. These stocks are M/I Homes Inc (NYSE:MHO), Palomar Holdings, Inc. (NASDAQ:PLMR), Nexgen Energy Ltd. (NYSE:NXE), BioAtla, Inc. (NASDAQ:BCAB), Krystal Biotech, Inc. (NASDAQ:KRYS), Castle Biosciences, Inc. (NASDAQ:CSTL), and Endo International plc (NASDAQ:ENDP). All of these stocks’ market caps are similar to OSIS’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.6 hedge funds with bullish positions and the average amount invested in these stocks was $255 million. That figure was $88 million in OSIS’s case. Castle Biosciences, Inc. (NASDAQ:CSTL) is the most popular stock in this table. On the other hand Krystal Biotech, Inc. (NASDAQ:KRYS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks OSI Systems, Inc. (NASDAQ:OSIS) is more popular among hedge funds. Our overall hedge fund sentiment score for OSIS is 83. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately OSIS wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on OSIS were disappointed as the stock returned 1% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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