Is OFIX A Good Stock To Buy Now?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Orthofix Medical Inc (NASDAQ:OFIX)? The smart money sentiment can provide an answer to this question.

Is OFIX a good stock to buy now? Investors who are in the know were selling. The number of bullish hedge fund bets shrunk by 2 in recent months. Orthofix Medical Inc (NASDAQ:OFIX) was in 17 hedge funds’ portfolios at the end of September. The all time high for this statistic is 23. Our calculations also showed that OFIX 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).

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.

Michael Castor of Sio Capital

Michael Castor of Sio Capital

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 15 best blue chip stocks 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. Keeping this in mind we’re going to view the key hedge fund action regarding Orthofix Medical Inc (NASDAQ:OFIX).

Do Hedge Funds Think OFIX Is A Good Stock To Buy Now?

At the end of September, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in OFIX over the last 21 quarters. 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 Orthofix Medical Inc (NASDAQ:OFIX) was held by Paradice Investment Management, which reported holding $30.9 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $22.5 million position. Other investors bullish on the company included Royce & Associates, Sio Capital, and GLG Partners. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to Orthofix Medical Inc (NASDAQ:OFIX), around 2.24% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 1.52 percent of its 13F equity portfolio to OFIX.

Because Orthofix Medical Inc (NASDAQ:OFIX) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of money managers who sold off their entire stakes in the third quarter. It’s worth mentioning that Matthew Hulsizer’s PEAK6 Capital Management sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, worth close to $0.1 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund dumped about $0 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Orthofix Medical Inc (NASDAQ:OFIX). These stocks are Calliditas Therapeutics AB (publ) (NASDAQ:CALT), Accelerate Diagnostics Inc (NASDAQ:AXDX), Amyris Inc (NASDAQ:AMRS), Meredith Corporation (NYSE:MDP), Cara Therapeutics Inc (NASDAQ:CARA), Passage Bio, Inc. (NASDAQ:PASG), and 3D Systems Corporation (NYSE:DDD). This group of stocks’ market valuations resemble OFIX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CALT 11 66043 -1
AXDX 13 31316 0
AMRS 11 124955 -5
MDP 18 162681 -2
CARA 19 75686 1
PASG 15 221636 2
DDD 15 33448 -3
Average 14.6 102252 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $102 million. That figure was $101 million in OFIX’s case. Cara Therapeutics Inc (NASDAQ:CARA) is the most popular stock in this table. On the other hand Calliditas Therapeutics AB (publ) (NASDAQ:CALT) is the least popular one with only 11 bullish hedge fund positions. Orthofix Medical Inc (NASDAQ:OFIX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OFIX is 62.7. 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 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on OFIX as the stock returned 24.1% since the end of Q3 (through 12/14) 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.