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Hedge Funds Have Never Been This Bullish On Orchid Island Capital, Inc. (ORC)

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 (Recession is Imminent: We Need A Travel Ban NOW). 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 Orchid Island Capital, Inc. (NYSE:ORC).

Is Orchid Island Capital, Inc. (NYSE:ORC) undervalued? Prominent investors are buying. The number of long hedge fund bets moved up by 5 in recent months. Our calculations also showed that ORC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

To most traders, hedge funds are seen as unimportant, old financial tools of years past. While there are more than 8000 funds trading today, Our experts look at the moguls of this group, about 850 funds. Most estimates calculate that this group of people direct the majority of the hedge fund industry’s total asset base, and by watching their top investments, Insider Monkey has determined numerous investment strategies that have historically outrun 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 annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Ken Griffin CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

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 let’s check out the recent hedge fund action encompassing Orchid Island Capital, Inc. (NYSE:ORC).

Hedge fund activity in Orchid Island Capital, Inc. (NYSE:ORC)

At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 167% from the previous quarter. On the other hand, there were a total of 3 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.

The largest stake in Orchid Island Capital, Inc. (NYSE:ORC) was held by Renaissance Technologies, which reported holding $8 million worth of stock at the end of September. It was followed by Winton Capital Management with a $2.1 million position. Other investors bullish on the company included Citadel Investment Group, Arrowstreet Capital, and Almitas Capital. In terms of the portfolio weights assigned to each position Almitas Capital allocated the biggest weight to Orchid Island Capital, Inc. (NYSE:ORC), around 0.48% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to ORC.

Now, key hedge funds have been driving this bullishness. Citadel Investment Group, managed by Ken Griffin, established the most valuable position in Orchid Island Capital, Inc. (NYSE:ORC). Citadel Investment Group had $0.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also made a $0.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Ron Mass’s Almitas Capital, John Overdeck and David Siegel’s Two Sigma Advisors, and Michael Gelband’s ExodusPoint Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Orchid Island Capital, Inc. (NYSE:ORC) but similarly valued. These stocks are ECMOHO Limited (NASDAQ:MOHO), XOMA Corp (NASDAQ:XOMA), Berry Corporation (NASDAQ:BRY), and General Finance Corporation (NASDAQ:GFN). This group of stocks’ market valuations are closest to ORC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MOHO 1 94 0
XOMA 8 75782 -2
BRY 16 35516 -4
GFN 3 7301 -2
Average 7 29673 -2

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 $30 million. That figure was $11 million in ORC’s case. Berry Corporation (NASDAQ:BRY) is the most popular stock in this table. On the other hand ECMOHO Limited (NASDAQ:MOHO) is the least popular one with only 1 bullish hedge fund positions. Orchid Island Capital, Inc. (NYSE:ORC) is not the most popular stock in this group but hedge fund interest is still above average. 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 still beat the market by 14.8 percentage points. Hedge funds were also right about betting on ORC as the stock returned 62.8% in Q2 (through June 17th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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