Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Orbotech Ltd (NASDAQ:ORBK) .
Orbotech Ltd (NASDAQ:ORBK) was in 15 hedge funds’ portfolios at the end of September. Hedge fund interest in ORBK shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ACCO Brands Corporation (NYSE:ACCO), Green Dot Corporation (NYSE:GDOT), and Amplify Snack Brands Inc (NYSE:BETR) to gather more data points.
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.
What does the smart money think about Orbotech Ltd (NASDAQ:ORBK)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in ORBK over the last 5 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’ Renaissance Technologies has the most valuable position in Orbotech Ltd (NASDAQ:ORBK), worth close to $62.7 million. The second most bullish fund manager is Rima Senvest Management, led by Richard Mashaal, which holds a $19.7 million position; 1.4% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism comprise Chuck Royce’s Royce & Associates, Robert B. Gillam’s McKinley Capital Management and D. E. Shaw’s D E Shaw. 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.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the third quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.
Let’s go over hedge fund activity in other stocks similar to Orbotech Ltd (NASDAQ:ORBK). These stocks are ACCO Brands Corporation (NYSE:ACCO), Green Dot Corporation (NYSE:GDOT), Amplify Snack Brands Inc (NYSE:BETR), and Innospec Inc. (NASDAQ:IOSP). This group of stocks’ market values match ORBK’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $94 million. That figure was $153 million in ORBK’s case. ACCO Brands Corporation (NYSE:ACCO) is the most popular stock in this table. On the other hand Amplify Snack Brands Inc (NYSE:BETR) is the least popular one with only 5 bullish hedge fund positions. Orbotech Ltd (NASDAQ:ORBK) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ACCO might be a better candidate to consider taking a long position in.