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Hedge Funds Are Coming Back To Ormat Technologies, Inc. (ORA)

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). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. 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 Ormat Technologies, Inc. (NYSE:ORA) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Is Ormat Technologies, Inc. (NYSE:ORA) a buy right now? The smart money was in an optimistic mood. The number of bullish hedge fund bets went up by 10 lately. Ormat Technologies, Inc. (NYSE:ORA) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistics is 17. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ORA 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). There were 9 hedge funds in our database with ORA holdings at the end of March.

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

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Ian Wace Marshall Wace

Ian Wace of Marshall Wace

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 let’s analyze the latest hedge fund action surrounding Ormat Technologies, Inc. (NYSE:ORA).

What does smart money think about Ormat Technologies, Inc. (NYSE:ORA)?

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 111% from the previous quarter. By comparison, 9 hedge funds held shares or bullish call options in ORA a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Impax Asset Management held the most valuable stake in Ormat Technologies, Inc. (NYSE:ORA), which was worth $114.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $35.3 million worth of shares. GAMCO Investors, Millennium Management, 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 Impax Asset Management allocated the biggest weight to Ormat Technologies, Inc. (NYSE:ORA), around 1.17% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, designating 0.78 percent of its 13F equity portfolio to ORA.

Now, specific money managers were leading the bulls’ herd. Millennium Management, managed by Israel Englander, created the biggest position in Ormat Technologies, Inc. (NYSE:ORA). Millennium Management had $5.6 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $3.1 million position during the quarter. The following funds were also among the new ORA investors: Michael Gelband’s ExodusPoint Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Paul Tudor Jones’s Tudor Investment Corp.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Ormat Technologies, Inc. (NYSE:ORA) but similarly valued. These stocks are Kirby Corporation (NYSE:KEX), The Hain Celestial Group, Inc. (NASDAQ:HAIN), KBR, Inc. (NYSE:KBR), BRF SA (NYSE:BRFS), Box, Inc. (NYSE:BOX), Pinnacle Financial Partners, Inc. (NASDAQ:PNFP), and nVent Electric plc (NYSE:NVT). All of these stocks’ market caps match ORA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
KEX 20 375194 -1
HAIN 24 829403 4
KBR 35 604967 7
BRFS 16 45626 2
BOX 33 655973 -1
PNFP 14 32187 1
NVT 27 428424 -2
Average 24.1 424539 1.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $425 million. That figure was $179 million in ORA’s case. KBR, Inc. (NYSE:KBR) is the most popular stock in this table. On the other hand Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) is the least popular one with only 14 bullish hedge fund positions. Ormat Technologies, Inc. (NYSE:ORA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ORA is 51.9. 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. This is a slightly negative signal and 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately ORA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); ORA investors were disappointed as the stock returned -6.7% in 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.