Is Oriental Financial Group Inc. (OFG) A Good Stock To Buy?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Oriental Financial Group Inc. (NYSE:OFG) from the perspective of those successful funds.

Is Oriental Financial Group Inc. (NYSE:OFG) a worthy investment right now? The smart money is altogether taking a bullish view. The number of bullish hedge fund investments improved by 3 lately. There were 8 hedge funds in our database with OFG holdings at the end of the previous quarter. At the end of this article we will also compare OFG to other stocks including OraSure Technologies, Inc. (NASDAQ:OSUR), QAD Inc. (NASDAQ:QADA), and Myokardia Inc (NASDAQ:MYOK) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Now, let’s take a gander at the latest action regarding Oriental Financial Group Inc. (NYSE:OFG).

What have hedge funds been doing with Oriental Financial Group Inc. (NYSE:OFG)?

Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the second quarter of 2016. On the other hand, there were a total of 11 hedge funds with a bullish position in OFG at the beginning of this year. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Carlson Capital, led by Clint Carlson, holds the most valuable position in Oriental Financial Group Inc. (NYSE:OFG). Carlson Capital has a $15.2 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Tegean Capital Management, led by Thomas G. Maheras, holding a $3.5 million position; 3.9% of its 13F portfolio is allocated to the company. Some other professional money managers with similar optimism encompass Bernard Horn’s Polaris Capital Management, Cliff Asness’s AQR Capital Management and Millennium Management, one of the biggest hedge funds in the world. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Polaris Capital Management, led by Bernard Horn, created the most outsized position in Oriental Financial Group Inc. (NYSE:OFG). Polaris Capital Management had $2.7 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $1.2 million position during the quarter. The other funds with brand new OFG positions are D. E. Shaw’s D E Shaw, John Overdeck and David Siegel’s Two Sigma Advisors, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Oriental Financial Group Inc. (NYSE:OFG) but similarly valued. We will take a look at OraSure Technologies, Inc. (NASDAQ:OSUR), QAD Inc. (NASDAQ:QADA), Myokardia Inc (NASDAQ:MYOK), and Barnes & Noble Education Inc (NYSE:BNED). This group of stocks’ market valuations match OFG’s market valuation.

As you can see these stocks had an average of 15.25 hedge funds with bullish positions and the average amount invested in these stocks was $75 million. That figure was $26 million in OFG’s case. OraSure Technologies, Inc. (NASDAQ:OSUR) is the most popular stock in this table. On the other hand QAD Inc. (NASDAQ:QADA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Oriental Financial Group Inc. (NYSE:OFG) is even less popular than QADA. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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