Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Orange SA (NYSE:ORAN)? The smart money sentiment can provide an answer to this question.
Is Orange SA (NYSE:ORAN) the right investment to pursue these days? Prominent investors were in an optimistic mood. The number of long hedge fund positions inched up by 1 lately. Orange SA (NYSE:ORAN) was in 4 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 5. Our calculations also showed that ORAN isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 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.
Israel Englander of Millennium Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s check out the latest hedge fund action surrounding Orange SA (NYSE:ORAN).
How are hedge funds trading Orange SA (NYSE:ORAN)?
At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 33% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ORAN over the last 21 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in Orange SA (NYSE:ORAN). Arrowstreet Capital has a $3.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Arrowstreet Capital’s heels is Citadel Investment Group, led by Ken Griffin, holding a $2.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism comprise Thomas Bailard’s Bailard Inc, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Bailard Inc allocated the biggest weight to Orange SA (NYSE:ORAN), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to ORAN.
As industrywide interest jumped, specific money managers were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Orange SA (NYSE:ORAN). Arrowstreet Capital had $3.3 million invested in the company at the end of the quarter.
Let’s now review hedge fund activity in other stocks similar to Orange SA (NYSE:ORAN). We will take a look at AutoZone, Inc. (NYSE:AZO), Yum! Brands, Inc. (NYSE:YUM), D.R. Horton, Inc. (NYSE:DHI), STMicroelectronics N.V. (NYSE:STM), Travelers Companies Inc (NYSE:TRV), Okta, Inc. (NASDAQ:OKTA), and V.F. Corporation (NYSE:VFC). All of these stocks’ market caps resemble ORAN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AZO | 53 | 2107685 | -2 |
| YUM | 42 | 1382033 | -5 |
| DHI | 62 | 2136859 | -4 |
| STM | 21 | 180953 | 9 |
| TRV | 35 | 418876 | 7 |
| OKTA | 51 | 1875052 | -9 |
| VFC | 22 | 457655 | -5 |
| Average | 40.9 | 1222730 | -1.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.9 hedge funds with bullish positions and the average amount invested in these stocks was $1223 million. That figure was $6 million in ORAN’s case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand STMicroelectronics N.V. (NYSE:STM) is the least popular one with only 21 bullish hedge fund positions. Compared to these stocks Orange SA (NYSE:ORAN) is even less popular than STM. Our overall hedge fund sentiment score for ORAN is 30. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on ORAN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on ORAN as the stock returned 22.5% since Q3 (through November 27th) and outperformed the market by an even larger margin.
Follow Orange S.a. (NYSE:ORAN)
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Disclosure: None. This article was originally published at Insider Monkey.
