Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW. We predicted that a US recession is imminent and US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. Our article also called for a total international travel ban to prevent the spread of the coronavirus especially from Europe. We were one step ahead of the markets and the president.
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Is ORIX Corporation (NYSE:IX) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is ORIX Corporation (NYSE:IX) a healthy stock for your portfolio? Prominent investors are becoming hopeful. The number of long hedge fund bets advanced by 1 recently. Our calculations also showed that IX isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). IX was in 6 hedge funds’ portfolios at the end of December. There were 5 hedge funds in our database with IX holdings at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a peek at the recent hedge fund action regarding ORIX Corporation (NYSE:IX).
Hedge fund activity in ORIX Corporation (NYSE:IX)
At the end of the fourth quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 7 hedge funds with a bullish position in IX a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of ORIX Corporation (NYSE:IX), with a stake worth $4 million reported as of the end of September. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $2.4 million. Millennium Management, Marshall Wace LLP, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Marshall Wace LLP allocated the biggest weight to ORIX Corporation (NYSE:IX), around 0.0037% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, setting aside 0.0031 percent of its 13F equity portfolio to IX.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most outsized position in ORIX Corporation (NYSE:IX). Marshall Wace LLP had $0.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.2 million investment in the stock during the quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as ORIX Corporation (NYSE:IX) but similarly valued. These stocks are Wipro Limited (NYSE:WIT), Boston Properties, Inc. (NYSE:BXP), XP Inc. (NASDAQ:XP), and Fastenal Company (NASDAQ:FAST). All of these stocks’ market caps are similar to IX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WIT | 12 | 98211 | 0 |
| BXP | 20 | 450068 | -7 |
| XP | 28 | 398066 | 28 |
| FAST | 33 | 834608 | 3 |
| Average | 23.25 | 445238 | 6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $445 million. That figure was $8 million in IX’s case. Fastenal Company (NASDAQ:FAST) is the most popular stock in this table. On the other hand Wipro Limited (NYSE:WIT) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks ORIX Corporation (NYSE:IX) is even less popular than WIT. Hedge funds dodged a bullet by taking a bearish stance towards IX. Our calculations showed that the top 20 most popular hedge fund stocks returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but managed to beat the market by 3.2 percentage points. Unfortunately IX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); IX investors were disappointed as the stock returned -25.8% during the same time period 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 so far in Q1.
Disclosure: None. This article was originally published at Insider Monkey.
