With the third-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the fourth quarter. One of these stocks was Opko Health Inc. (NASDAQ:OPK).
Is OPK a good stock to buy now? Investors who are in the know were in a bearish mood. The number of long hedge fund positions fell by 5 in recent months. Opko Health Inc. (NASDAQ:OPK) was in 11 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 24. Our calculations also showed that OPK 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 16 hedge funds in our database with OPK positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 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 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. With all of this in mind we’re going to take a gander at the latest hedge fund action regarding Opko Health Inc. (NASDAQ:OPK).
Do Hedge Funds Think OPK Is A Good Stock To Buy Now?
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from the second quarter of 2020. By comparison, 13 hedge funds held shares or bullish call options in OPK a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Opko Health Inc. (NASDAQ:OPK) was held by Trellus Management Company, which reported holding $9.6 million worth of stock at the end of September. It was followed by Aristeia Capital with a $6 million position. Other investors bullish on the company included Citadel Investment Group, AQR Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Trellus Management Company allocated the biggest weight to Opko Health Inc. (NASDAQ:OPK), around 9.79% of its 13F portfolio. Aristeia Capital is also relatively very bullish on the stock, setting aside 0.25 percent of its 13F equity portfolio to OPK.
Due to the fact that Opko Health Inc. (NASDAQ:OPK) has witnessed a decline in interest from the smart money, logic holds that there is a sect of funds that elected to cut their full holdings heading into Q4. Interestingly, Michael A. Price and Amos Meron’s Empyrean Capital Partners dropped the largest position of the 750 funds tracked by Insider Monkey, comprising an estimated $7.1 million in stock. Mark Coe’s fund, Intrinsic Edge Capital, also dropped its stock, about $3.7 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 5 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Opko Health Inc. (NASDAQ:OPK). These stocks are Sprouts Farmers Market Inc (NASDAQ:SFM), J&J Snack Foods Corp. (NASDAQ:JJSF), Spectrum Brands Holdings, Inc. (NYSE:SPB), American Eagle Outfitters Inc. (NYSE:AEO), NorthWestern Corporation (NASDAQ:NWE), Bloom Energy Corporation (NYSE:BE), and Uniti Group Inc. (NASDAQ:UNIT). This group of stocks’ market values match OPK’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 26 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $27 million in OPK’s case. American Eagle Outfitters Inc. (NYSE:AEO) is the most popular stock in this table. On the other hand J&J Snack Foods Corp. (NASDAQ:JJSF) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Opko Health Inc. (NASDAQ:OPK) is even less popular than JJSF. Our overall hedge fund sentiment score for OPK is 13.8. 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. Hedge funds clearly dropped the ball on OPK as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on OPK as the stock returned 28.7% since Q3 (through December 8th) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.