Hedge Funds Are Dumping Ormat Technologies, Inc. (ORA)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Ormat Technologies, Inc. (NYSE:ORA) based on that data.

Ormat Technologies, Inc. (NYSE:ORA) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. ORA was in 9 hedge funds’ portfolios at the end of March. There were 16 hedge funds in our database with ORA holdings at the end of the previous quarter. Our calculations also showed that ORA isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 58 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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

James Dondero of Highland Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the top 15 defense contractors in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a peek at the new hedge fund action surrounding Ormat Technologies, Inc. (NYSE:ORA).

Hedge fund activity in Ormat Technologies, Inc. (NYSE:ORA)

At Q1’s end, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -44% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ORA over the last 18 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

The largest stake in Ormat Technologies, Inc. (NYSE:ORA) was held by Impax Asset Management, which reported holding $101.1 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $49.2 million position. Other investors bullish on the company included GAMCO Investors, Brasada Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Impax Asset Management allocated the biggest weight to Ormat Technologies, Inc. (NYSE:ORA), around 1.35% of its 13F portfolio. Brasada Capital Management is also relatively very bullish on the stock, earmarking 1.08 percent of its 13F equity portfolio to ORA.

Seeing as Ormat Technologies, Inc. (NYSE:ORA) has experienced a decline in interest from hedge fund managers, it’s easy to see that there were a few funds who sold off their full holdings heading into Q4. Intriguingly, Minhua Zhang’s Weld Capital Management cut the largest investment of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $2.2 million in stock, and Bruce Kovner’s Caxton Associates LP was right behind this move, as the fund sold off about $1.1 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 7 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Ormat Technologies, Inc. (NYSE:ORA) but similarly valued. These stocks are Schneider National, Inc. (NYSE:SNDR), Enstar Group Ltd. (NASDAQ:ESGR), Houlihan Lokey Inc (NYSE:HLI), and Choice Hotels International, Inc. (NYSE:CHH). This group of stocks’ market values are closest to ORA’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $165 million in ORA’s case. Schneider National, Inc. (NYSE:SNDR) is the most popular stock in this table. On the other hand Enstar Group Ltd. (NASDAQ:ESGR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Ormat Technologies, Inc. (NYSE:ORA) is even less popular than ESGR. Hedge funds dodged a bullet by taking a bearish stance towards ORA. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.4% in 2020 through June 22nd but managed to beat the market by 15.9 percentage points. Unfortunately ORA wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ORA investors were disappointed as the stock returned 0.7% during the second quarter (through June 22nd) 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 most of these stocks already outperformed the market so far in 2020.

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