Is OTRK A Good Stock To Buy Now?

In this article you are going to find out whether hedge funds think Ontrak, Inc. (NASDAQ:OTRK) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is OTRK a good stock to buy now? Hedge funds were buying. The number of long hedge fund bets improved by 1 in recent months. Ontrak, Inc. (NASDAQ:OTRK) was in 12 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 11. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that OTRK 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.

To most traders, hedge funds are perceived as slow, old investment tools of the past. While there are greater than 8000 funds in operation at the moment, Our experts choose to focus on the aristocrats of this group, approximately 850 funds. These money managers administer most of the smart money’s total capital, and by tailing their inimitable picks, Insider Monkey has found numerous investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 13% since February 2017 (through November 17th) even though the market was up 65% during the same period. We just shared a list of 6 short targets in our latest quarterly update .

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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 let’s take a gander at the recent hedge fund action regarding Ontrak, Inc. (NASDAQ:OTRK).

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

At third quarter’s end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 9% from one quarter earlier. By comparison, 7 hedge funds held shares or bullish call options in OTRK a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is OTRK A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the number one position in Ontrak, Inc. (NASDAQ:OTRK). Citadel Investment Group has a $5.3 million call position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is D E Shaw, led by D. E. Shaw, holding a $4.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that are bullish include Chuck Royce’s Royce & Associates, Ken Griffin’s Citadel Investment Group and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors. In terms of the portfolio weights assigned to each position Schonfeld Strategic Advisors allocated the biggest weight to Ontrak, Inc. (NASDAQ:OTRK), around 0.12% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to OTRK.

As one would reasonably expect, some big names have jumped into Ontrak, Inc. (NASDAQ:OTRK) headfirst. D E Shaw, managed by D. E. Shaw, created the largest position in Ontrak, Inc. (NASDAQ:OTRK). D E Shaw had $4.2 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $2.3 million investment in the stock during the quarter. The following funds were also among the new OTRK investors: Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Ontrak, Inc. (NASDAQ:OTRK). These stocks are Safety Insurance Group, Inc. (NASDAQ:SAFT), Cerus Corporation (NASDAQ:CERS), Kiniksa Pharmaceuticals, Ltd. (NASDAQ:KNSA), BP Midstream Partners LP (NYSE:BPMP), TriMas Corp (NASDAQ:TRS), Esperion Therapeutics (NASDAQ:ESPR), and BrightSphere Investment Group Inc (NYSE:BSIG). This group of stocks’ market values resemble OTRK’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAFT 17 42473 4
CERS 12 112765 -2
KNSA 20 212720 2
BPMP 5 8204 2
TRS 14 70904 -3
ESPR 17 222235 -2
BSIG 25 374125 3
Average 15.7 149061 0.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $13 million in OTRK’s case. BrightSphere Investment Group Inc (NYSE:BSIG) is the most popular stock in this table. On the other hand BP Midstream Partners LP (NYSE:BPMP) is the least popular one with only 5 bullish hedge fund positions. Ontrak, Inc. (NASDAQ:OTRK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OTRK is 53.5. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 surpassed the market again by 16.2 percentage points. Unfortunately OTRK wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); OTRK investors were disappointed as the stock returned -5.2% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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