Is ORBCOMM Inc (ORBC) Going to Burn These Hedge Funds?

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 ORBCOMM Inc (NASDAQ:ORBC).

ORBCOMM Inc (NASDAQ:ORBC) shareholders have witnessed an increase in hedge fund interest lately. Our calculations also showed that ORBC 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Phill Gross of Adage Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the new hedge fund action regarding ORBCOMM Inc (NASDAQ:ORBC).

How have hedgies been trading ORBCOMM Inc (NASDAQ:ORBC)?

At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ORBC over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

The largest stake in ORBCOMM Inc (NASDAQ:ORBC) was held by Adage Capital Management, which reported holding $18.9 million worth of stock at the end of September. It was followed by Ariel Investments with a $6.7 million position. Other investors bullish on the company included Rubric Capital Management, Renaissance Technologies, and Millennium Management. In terms of the portfolio weights assigned to each position Rubric Capital Management allocated the biggest weight to ORBCOMM Inc (NASDAQ:ORBC), around 0.64% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to ORBC.

With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Rubric Capital Management, managed by David Rosen, assembled the most valuable position in ORBCOMM Inc (NASDAQ:ORBC). Rubric Capital Management had $4.1 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $0 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 ORBCOMM Inc (NASDAQ:ORBC) but similarly valued. These stocks are Trilogy Metals Inc. (NYSE:TMQ), LAIX Inc. (NYSE:LAIX), MiX Telematics Limited (NYSE:MIXT), and Co-Diagnostics, Inc. (NASDAQ:CODX). This group of stocks’ market caps match ORBC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TMQ 7 45140 -5
LAIX 1 45 -2
MIXT 9 17815 -3
CODX 5 2044 4
Average 5.5 16261 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $43 million in ORBC’s case. MiX Telematics Limited (NYSE:MIXT) is the most popular stock in this table. On the other hand LAIX Inc. (NYSE:LAIX) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks ORBCOMM Inc (NASDAQ:ORBC) is more popular among hedge funds. 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 returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on ORBC as the stock returned 58.6% so far in Q2 (through June 22nd) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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