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Hedge Funds Have Never Been This Bullish On Orchard Therapeutics plc (ORTX)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Orchard Therapeutics plc (NASDAQ:ORTX).

Orchard Therapeutics plc (NASDAQ:ORTX) investors should pay attention to an increase in hedge fund interest of late. Our calculations also showed that ORTX isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Kolchinsky

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a glance at the key hedge fund action regarding Orchard Therapeutics plc (NASDAQ:ORTX).

What have hedge funds been doing with Orchard Therapeutics plc (NASDAQ:ORTX)?

Heading into the third quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 62% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ORTX over the last 16 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with ORTX Positions

Among these funds, Deerfield Management held the most valuable stake in Orchard Therapeutics plc (NASDAQ:ORTX), which was worth $124.8 million at the end of the second quarter. On the second spot was RA Capital Management which amassed $71.5 million worth of shares. Moreover, Adage Capital Management, Driehaus Capital, and Vivo Capital were also bullish on Orchard Therapeutics plc (NASDAQ:ORTX), allocating a large percentage of their portfolios to this stock.

With a general bullishness amongst the heavyweights, specific money managers have jumped into Orchard Therapeutics plc (NASDAQ:ORTX) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, created the most outsized position in Orchard Therapeutics plc (NASDAQ:ORTX). Balyasny Asset Management had $3.2 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $2.4 million position during the quarter. The other funds with brand new ORTX positions are Brian Ashford-Russell and Tim Woolley’s Polar Capital, Eli Casdin’s Casdin Capital, and Warren Lammert’s Granite Point Capital.

Let’s go over hedge fund activity in other stocks similar to Orchard Therapeutics plc (NASDAQ:ORTX). These stocks are Axonics Modulation Technologies, Inc. (NASDAQ:AXNX), KKR Real Estate Finance Trust Inc. (NYSE:KREF), Arbor Realty Trust, Inc. (NYSE:ABR), and Five Point Holdings, LLC (NYSE:FPH). This group of stocks’ market caps resemble ORTX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AXNX 12 132890 2
KREF 9 50623 0
ABR 14 101201 5
FPH 14 232584 -2
Average 12.25 129325 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 $129 million. That figure was $305 million in ORTX’s case. Arbor Realty Trust, Inc. (NYSE:ABR) is the most popular stock in this table. On the other hand KKR Real Estate Finance Trust Inc. (NYSE:KREF) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Orchard Therapeutics plc (NASDAQ:ORTX) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ORTX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ORTX were disappointed as the stock returned -15.1% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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

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