In this article we are going to use hedge fund sentiment as a tool and determine whether Orion Energy Systems, Inc. (NYSE:OESX) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is OESX a good stock to buy now? Investors who are in the know were becoming hopeful. The number of long hedge fund bets went up by 1 recently. Orion Energy Systems, Inc. (NYSE:OESX) was in 7 hedge funds’ portfolios at the end of September. The all time high for this statistics is 8. Our calculations also showed that OESX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 6 hedge funds in our database with OESX holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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. With all of this in mind let’s take a look at the new hedge fund action encompassing Orion Energy Systems, Inc. (NYSE:OESX).
How are hedge funds trading Orion Energy Systems, Inc. (NYSE:OESX)?
Heading into the fourth quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. On the other hand, there were a total of 6 hedge funds with a bullish position in OESX a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in Orion Energy Systems, Inc. (NYSE:OESX), worth close to $18.3 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $2.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions encompass John W. Rogers’s Ariel Investments, Cliff Asness’s AQR Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Manatuck Hill Partners allocated the biggest weight to Orion Energy Systems, Inc. (NYSE:OESX), around 0.17% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, designating 0.03 percent of its 13F equity portfolio to OESX.
Now, key money managers have been driving this bullishness. AQR Capital Management, managed by Cliff Asness, initiated the biggest position in Orion Energy Systems, Inc. (NYSE:OESX). AQR Capital Management had $1.1 million invested in the company at the end of the quarter. Mark Broach’s Manatuck Hill Partners also made a $0.4 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Orion Energy Systems, Inc. (NYSE:OESX) but similarly valued. We will take a look at The ExOne Company (NASDAQ:XONE), Summit Therapeutics PLC (NASDAQ:SMMT), Hometrust Bancshares Inc (NASDAQ:HTBI), Gladstone Capital Corporation (NASDAQ:GLAD), Alta Equipment Group Inc. (NYSE:ALTG), Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA), and CyberOptics Corporation (NASDAQ:CYBE). This group of stocks’ market values match OESX’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.9 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $25 million in OESX’s case. Liberty Tripadvisor Holdings Inc (NASDAQ:LTRPA) is the most popular stock in this table. On the other hand Summit Therapeutics PLC (NASDAQ:SMMT) is the least popular one with only 1 bullish hedge fund positions. Orion Energy Systems, Inc. (NYSE:OESX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OESX is 48. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and still beat the market by 16 percentage points. A small number of hedge funds were also right about betting on OESX as the stock returned 23.9% since the end of the third quarter (through 12/2) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.