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Hedge Funds Cautiously Watching Orion Energy Systems, Inc. (OESX)

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st, about a week after the S&P 500 Index bottomed. We at Insider Monkey have made an extensive database of more than 821 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Orion Energy Systems, Inc. (NASDAQ:OESX) based on those filings.

Hedge fund interest in Orion Energy Systems, Inc. (NASDAQ:OESX) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare OESX to other stocks including First Western Financial, Inc. (NASDAQ:MYFW), Mackinac Financial Corporation (NASDAQ:MFNC), and Anworth Mortgage Asset Corporation (NYSE:ANH) to get a better sense of its popularity.

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 58 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.

John Rogers Ariel Investments

John Rogers of Ariel Investments

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to go over the recent hedge fund action encompassing Orion Energy Systems, Inc. (NASDAQ:OESX).

How have hedgies been trading Orion Energy Systems, Inc. (NASDAQ:OESX)?

Heading into the second quarter of 2020, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. By comparison, 2 hedge funds held shares or bullish call options in OESX a year ago. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the biggest position in Orion Energy Systems, Inc. (NASDAQ:OESX). Renaissance Technologies has a $8.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Ariel Investments, led by John W. Rogers, holding a $0.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of Israel Englander’s Millennium Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to Orion Energy Systems, Inc. (NASDAQ:OESX), around 0.02% of its 13F portfolio. Bailard Inc is also relatively very bullish on the stock, setting aside 0.01 percent of its 13F equity portfolio to OESX.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Algert Coldiron Investors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was ExodusPoint Capital).

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Orion Energy Systems, Inc. (NASDAQ:OESX) but similarly valued. These stocks are First Western Financial, Inc. (NASDAQ:MYFW), Mackinac Financial Corporation (NASDAQ:MFNC), Anworth Mortgage Asset Corporation (NYSE:ANH), and Pixelworks, Inc. (NASDAQ:PXLW). This group of stocks’ market valuations are similar to OESX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MYFW 5 7992 0
MFNC 5 8683 1
ANH 10 12358 -4
PXLW 8 7919 1
Average 7 9238 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $12 million in OESX’s case. Anworth Mortgage Asset Corporation (NYSE:ANH) is the most popular stock in this table. On the other hand First Western Financial, Inc. (NASDAQ:MYFW) is the least popular one with only 5 bullish hedge fund positions. Orion Energy Systems, Inc. (NASDAQ:OESX) 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 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately OESX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on OESX were disappointed as the stock returned -8.4% 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.