How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Orthofix Medical Inc (NASDAQ:OFIX) and determine whether hedge funds had an edge regarding this stock.
Orthofix Medical Inc (NASDAQ:OFIX) has experienced an increase in hedge fund sentiment lately. Orthofix Medical Inc (NASDAQ:OFIX) was in 19 hedge funds’ portfolios at the end of June. The all time high for this statistics is 23. Our calculations also showed that OFIX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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To most market participants, hedge funds are perceived as unimportant, outdated investment tools of yesteryear. While there are more than 8000 funds with their doors open at present, We hone in on the leaders of this club, about 850 funds. It is estimated that this group of investors direct bulk of the smart money’s total capital, and by shadowing their top picks, Insider Monkey has identified many investment strategies that have historically outperformed Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Matthew Hulsizer of PEAK6 Capital
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 are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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 to get excerpts of these letters in your inbox. With all of this in mind let’s take a gander at the new hedge fund action surrounding Orthofix Medical Inc (NASDAQ:OFIX).
How have hedgies been trading Orthofix Medical Inc (NASDAQ:OFIX)?
At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in OFIX over the last 20 quarters. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Paradice Investment Management, managed by David Paradice, holds the largest position in Orthofix Medical Inc (NASDAQ:OFIX). Paradice Investment Management has a $32.7 million position in the stock, comprising 2.5% of its 13F portfolio. Coming in second is Renaissance Technologies, with a $19.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other professional money managers that are bullish comprise Chuck Royce’s Royce & Associates, Michael Castor’s Sio Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to Orthofix Medical Inc (NASDAQ:OFIX), around 2.46% of its 13F portfolio. Sio Capital is also relatively very bullish on the stock, earmarking 1.79 percent of its 13F equity portfolio to OFIX.
Consequently, key hedge funds have jumped into Orthofix Medical Inc (NASDAQ:OFIX) headfirst. Sio Capital, managed by Michael Castor, initiated the most valuable position in Orthofix Medical Inc (NASDAQ:OFIX). Sio Capital had $6.1 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $0.1 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Orthofix Medical Inc (NASDAQ:OFIX) but similarly valued. We will take a look at Tenneco Inc (NYSE:TEN), National Presto Industries Inc. (NYSE:NPK), ScanSource, Inc. (NASDAQ:SCSC), TrustCo Bank Corp NY (NASDAQ:TRST), AnaptysBio, Inc. (NASDAQ:ANAB), Evolent Health Inc (NYSE:EVH), and Corbus Pharmaceuticals Holdings Inc (NASDAQ:CRBP). This group of stocks’ market values match OFIX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TEN | 14 | 87799 | -3 |
| NPK | 8 | 57195 | 2 |
| SCSC | 13 | 54289 | -1 |
| TRST | 13 | 30132 | 2 |
| ANAB | 26 | 370293 | 1 |
| EVH | 15 | 66099 | 2 |
| CRBP | 14 | 93941 | 4 |
| Average | 14.7 | 108535 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.7 hedge funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was $101 million in OFIX’s case. AnaptysBio, Inc. (NASDAQ:ANAB) is the most popular stock in this table. On the other hand National Presto Industries Inc. (NYSE:NPK) is the least popular one with only 8 bullish hedge fund positions. Orthofix Medical Inc (NASDAQ:OFIX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OFIX is 62.3. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately OFIX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on OFIX were disappointed as the stock returned -2.7% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Follow Orthofix Medical Inc. (NASDAQ:OFIX)
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Disclosure: None. This article was originally published at Insider Monkey.
