Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Oritani Financial Corp. (NASDAQ:ORIT) changed recently.
Oritani Financial Corp. (NASDAQ:ORIT) shareholders have witnessed a decrease in activity from the world’s largest hedge funds lately. Our calculations also showed that ORIT isn’t among the 30 most popular stocks among hedge funds (see the video below).
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a peek at the recent hedge fund action surrounding Oritani Financial Corp. (NASDAQ:ORIT).
What have hedge funds been doing with Oritani Financial Corp. (NASDAQ:ORIT)?
At Q2’s end, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in ORIT over the last 16 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Oritani Financial Corp. (NASDAQ:ORIT) was held by Renaissance Technologies, which reported holding $35 million worth of stock at the end of March. It was followed by Winton Capital Management with a $0.5 million position. Other investors bullish on the company included AQR Capital Management, Two Sigma Advisors, and Arrowstreet Capital.
Judging by the fact that Oritani Financial Corp. (NASDAQ:ORIT) has experienced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of funds that slashed their positions entirely by the end of the second quarter. At the top of the heap, Israel Englander’s Millennium Management dumped the largest stake of the “upper crust” of funds followed by Insider Monkey, worth about $0.9 million in stock, and Ken Griffin’s Citadel Investment Group was right behind this move, as the fund cut about $0.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds by the end of the second quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Oritani Financial Corp. (NASDAQ:ORIT) but similarly valued. These stocks are ConnectOne Bancorp Inc (NASDAQ:CNOB), Clovis Oncology Inc (NASDAQ:CLVS), Enova International Inc (NYSE:ENVA), and Boingo Wireless Inc (NASDAQ:WIFI). This group of stocks’ market caps resemble ORIT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNOB | 9 | 44949 | -1 |
| CLVS | 24 | 268085 | -5 |
| ENVA | 20 | 153666 | 0 |
| WIFI | 14 | 94487 | -3 |
| Average | 16.75 | 140297 | -2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. That figure was $37 million in ORIT’s case. Clovis Oncology Inc (NASDAQ:CLVS) is the most popular stock in this table. On the other hand ConnectOne Bancorp Inc (NASDAQ:CNOB) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Oritani Financial Corp. (NASDAQ:ORIT) is even less popular than CNOB. Hedge funds dodged a bullet by taking a bearish stance towards ORIT. Our calculations showed that the top 20 most popular hedge fund stocks returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately ORIT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); ORIT investors were disappointed as the stock returned 1.2% during the third quarter 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 many of these stocks already outperformed the market so far in 2019.
Disclosure: None. This article was originally published at Insider Monkey.
