Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Oportun Financial Corporation (NASDAQ:OPRT) to find out whether there were any major changes in hedge funds’ views.
Is Oportun Financial (OPRT) a good stock to buy now? OPRT shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of September. Our calculations also showed that OPRT 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). At the end of this article we will also compare OPRT to other stocks including Artesian Resources Corporation (NASDAQ:ARTNA), Aspira Women’s Health Inc. (NASDAQ:AWH), and Whole Earth Brands, Inc. (NASDAQ:FREE) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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 review the fresh hedge fund action surrounding Oportun Financial Corporation (NASDAQ:OPRT).
What does smart money think about Oportun Financial Corporation (NASDAQ:OPRT)?
Heading into the fourth quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in OPRT over the last 21 quarters. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
The largest stake in Oportun Financial Corporation (NASDAQ:OPRT) was held by Arrowstreet Capital, which reported holding $1.4 million worth of stock at the end of September. It was followed by Mendon Capital Advisors with a $0.5 million position. Other investors bullish on the company included Millennium Management, Wildcat Capital Management, and EJF Capital. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to Oportun Financial Corporation (NASDAQ:OPRT), around 0.28% of its 13F portfolio. Wildcat Capital Management is also relatively very bullish on the stock, earmarking 0.07 percent of its 13F equity portfolio to OPRT.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: D E Shaw. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was EJF Capital).
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Oportun Financial Corporation (NASDAQ:OPRT) but similarly valued. These stocks are Artesian Resources Corporation (NASDAQ:ARTNA), Aspira Women’s Health Inc. (NASDAQ:AWH), Whole Earth Brands, Inc. (NASDAQ:FREE), Allot Ltd. (NASDAQ:ALLT), Avadel Pharmaceuticals plc (NASDAQ:AVDL), First Community Bancshares Inc (NASDAQ:FCBC), and Modine Manufacturing Company (NYSE:MOD). All of these stocks’ market caps are similar to OPRT’s market cap.
|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 10.7 hedge funds with bullish positions and the average amount invested in these stocks was $52 million. That figure was $3 million in OPRT’s case. Whole Earth Brands, Inc. (NASDAQ:FREE) is the most popular stock in this table. On the other hand Artesian Resources Corporation (NASDAQ:ARTNA) is the least popular one with only 1 bullish hedge fund positions. Oportun Financial Corporation (NASDAQ:OPRT) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OPRT is 26.1. 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 November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on OPRT as the stock returned 49.7% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.