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. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards ORIX Corporation (NYSE:IX) to find out whether it was one of their high conviction long-term ideas.
Is ORIX Corporation (NYSE:IX) a great stock to buy now? Money managers are in a pessimistic mood. The number of long hedge fund bets shrunk by 2 lately. Our calculations also showed that IX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). IX was in 4 hedge funds’ portfolios at the end of the third quarter of 2019. There were 6 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.
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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.
John Overdeck of Two Sigma Advisors
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. Now let’s take a look at the latest hedge fund action surrounding ORIX Corporation (NYSE:IX).
How have hedgies been trading ORIX Corporation (NYSE:IX)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IX over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, David E. Shaw’s D E Shaw has the biggest position in ORIX Corporation (NYSE:IX), worth close to $3.2 million, comprising less than 0.1%% of its total 13F portfolio. On D E Shaw’s heels is Renaissance Technologies, with a $2.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions comprise Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors and . In terms of the portfolio weights assigned to each position D E Shaw allocated the biggest weight to ORIX Corporation (NYSE:IX), around 0.004% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, designating 0.0025 percent of its 13F equity portfolio to IX.
Because ORIX Corporation (NYSE:IX) has witnessed falling interest from the smart money, we can see that there lies a certain “tier” of funds that elected to cut their positions entirely heading into Q4. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace dropped the largest investment of all the hedgies monitored by Insider Monkey, totaling close to $2.7 million in stock. Ken Griffin’s fund, Citadel Investment Group, also cut its stock, about $0.3 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as ORIX Corporation (NYSE:IX) but similarly valued. These stocks are Ameriprise Financial, Inc. (NYSE:AMP), The Clorox Company (NYSE:CLX), Cincinnati Financial Corporation (NASDAQ:CINF), and CGI Inc. (NYSE:GIB). This group of stocks’ market caps match IX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMP | 27 | 1104619 | -12 |
| CLX | 32 | 1004826 | 4 |
| CINF | 23 | 565077 | 5 |
| GIB | 14 | 300448 | 0 |
| Average | 24 | 743743 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $744 million. That figure was $8 million in IX’s case. The Clorox Company (NYSE:CLX) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks ORIX Corporation (NYSE:IX) is even less popular than GIB. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on IX, though not to the same extent, as the stock returned 9.4% during the fourth quarter (through 11/30) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
