Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards OptimizeRx Corporation (NASDAQ:OPRX) to find out whether there were any major changes in hedge funds’ views.
OptimizeRx Corporation (NASDAQ:OPRX) was in 4 hedge funds’ portfolios at the end of September. The all time high for this statistics is 10. OPRX investors should be aware of a decrease in enthusiasm from smart money in recent months. There were 5 hedge funds in our database with OPRX positions at the end of the second quarter. Our calculations also showed that OPRX 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.
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 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Chuck Royce of Royce & Associates
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 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. With all of this in mind let’s take a look at the new hedge fund action surrounding OptimizeRx Corporation (NASDAQ:OPRX).
Hedge fund activity in OptimizeRx Corporation (NASDAQ:OPRX)
At the end of September, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OPRX over the last 21 quarters. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, G2 Investment Partners Management, managed by Josh Goldberg, holds the most valuable position in OptimizeRx Corporation (NASDAQ:OPRX). G2 Investment Partners Management has a $18.5 million position in the stock, comprising 4.5% of its 13F portfolio. On G2 Investment Partners Management’s heels is Venator Capital Management, led by Brandon Osten, holding a $6.5 million position; 3.5% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism include Peter A. Wright’s P.A.W. CAPITAL PARTNERS, Chuck Royce’s Royce & Associates and . In terms of the portfolio weights assigned to each position G2 Investment Partners Management allocated the biggest weight to OptimizeRx Corporation (NASDAQ:OPRX), around 4.47% of its 13F portfolio. Venator Capital Management is also relatively very bullish on the stock, earmarking 3.47 percent of its 13F equity portfolio to OPRX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: PEAK6 Capital Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified OPRX as a viable investment and initiated a position in the stock.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as OptimizeRx Corporation (NASDAQ:OPRX) but similarly valued. We will take a look at Meten EdtechX Education Group Ltd. (NASDAQ:METX), Conn’s, Inc. (NASDAQ:CONN), HBT Financial, Inc. (NASDAQ:HBT), Galiano Gold Inc. (NYSE:GAU), Willdan Group, Inc. (NASDAQ:WLDN), Farmers National Banc Corp (NASDAQ:FMNB), and Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX). This group of stocks’ market values are closest to OPRX’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| METX | 3 | 72 | 0 |
| CONN | 14 | 21354 | -2 |
| HBT | 9 | 10415 | 3 |
| GAU | 6 | 42056 | 1 |
| WLDN | 3 | 8995 | -1 |
| FMNB | 9 | 7526 | 1 |
| CPRX | 17 | 57604 | -5 |
| Average | 8.7 | 21146 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.7 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $29 million in OPRX’s case. Catalyst Pharmaceuticals, Inc. (NASDAQ:CPRX) is the most popular stock in this table. On the other hand Meten EdtechX Education Group Ltd. (NASDAQ:METX) is the least popular one with only 3 bullish hedge fund positions. OptimizeRx Corporation (NASDAQ:OPRX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OPRX is 19.6. 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. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on OPRX as the stock returned 20.6% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
