Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Orange S.A. (NYSE:ORAN).
Orange S.A. (NYSE:ORAN) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. Our calculations also showed that ORAN isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Dmitry Balyasny of Balyasny Asset Managemnet
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to analyze the new hedge fund action regarding Orange S.A. (NYSE:ORAN).
What does smart money think about Orange S.A. (NYSE:ORAN)?
At Q4’s end, a total of 2 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -50% from the previous quarter. By comparison, 2 hedge funds held shares or bullish call options in ORAN a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Orange S.A. (NYSE:ORAN) was held by Citadel Investment Group, which reported holding $0.4 million worth of stock at the end of September. It was followed by Balyasny Asset Management with a $0.2 million position.
Judging by the fact that Orange S.A. (NYSE:ORAN) has faced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there were a few money managers that elected to cut their entire stakes heading into Q4. Interestingly, Israel Englander’s Millennium Management dumped the largest position of the 750 funds tracked by Insider Monkey, worth an estimated $1.1 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dumped its stock, about $0.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds heading into Q4.
Let’s check out hedge fund activity in other stocks similar to Orange S.A. (NYSE:ORAN). These stocks are Valero Energy Corporation (NYSE:VLO), Canadian Natural Resources Limited (NYSE:CNQ), Dell Technologies Inc. (NYSE:DELL), and Delta Air Lines, Inc. (NYSE:DAL). This group of stocks’ market caps match ORAN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| VLO | 46 | 636299 | 9 |
| CNQ | 29 | 530611 | -5 |
| DELL | 41 | 2361969 | -6 |
| DAL | 70 | 7037405 | -1 |
| Average | 46.5 | 2641571 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.5 hedge funds with bullish positions and the average amount invested in these stocks was $2642 million. That figure was $1 million in ORAN’s case. Delta Air Lines, Inc. (NYSE:DAL) is the most popular stock in this table. On the other hand Canadian Natural Resources Limited (NYSE:CNQ) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Orange S.A. (NYSE:ORAN) is even less popular than CNQ. Hedge funds dodged a bullet by taking a bearish stance towards ORAN. 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 11.7% in 2020 through March 11th but managed to beat the market by 3.1 percentage points. Unfortunately ORAN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ORAN investors were disappointed as the stock returned -17.9% 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.
