The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Orbital ATK Inc (NYSE:OA), and what that likely means for the prospects of the company and its stock.
Is Orbital ATK Inc (NYSE:OA) the right pick for your portfolio? Hedge funds are in an optimistic mood. The number of long hedge fund positions moved up by 3 in recent months. OA was in 33 hedge funds’ portfolios at the end of September. There were 30 hedge funds in our database with OA holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ICON plc – Ordinary Shares (NASDAQ:ICLR), Core Laboratories N.V. (NYSE:CLB), and Commerce Bancshares, Inc. (NASDAQ:CBSH) to gather more data points.
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If you’d ask most investors, hedge funds are seen as underperforming, old investment tools of the past. While there are over an 8000 funds with their doors open today, our researchers hone in on the leaders of this club, approximately 700 funds. Most estimates calculate that this group of people preside over bulk of the hedge fund industry’s total capital, and by watching their finest stock picks, Insider Monkey has spotted a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points a year for a decade in their back tests.
With all of this in mind, we’re going to analyze the new action encompassing Orbital ATK Inc (NYSE:OA).
What have hedge funds been doing with Orbital ATK Inc (NYSE:OA)?
At the Q3’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the second quarter. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Richard Barrera’s Roystone Capital Partners has the number one position in Orbital ATK Inc (NYSE:OA), worth close to $130.2 million, comprising 6.2% of its total 13F portfolio. Sitting at the No. 2 spot is Alyeska Investment Group, managed by Anand Parekh, which holds a $66.1 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining peers that hold long positions contain Jay Petschek and Steven Major’s Corsair Capital Management, Israel Englander’s Millennium Management and Cliff Asness’s AQR Capital Management.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most outsized position in Orbital ATK Inc (NYSE:OA). Balyasny Asset Management had $19.9 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $11.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Matthew Tewksbury’s Stevens Capital Management, and Peter Muller’s PDT Partners.
Let’s also examine hedge fund activity in other stocks similar to Orbital ATK Inc (NYSE:OA). We will take a look at ICON plc – Ordinary Shares (NASDAQ:ICLR), Core Laboratories N.V. (NYSE:CLB), Commerce Bancshares, Inc. (NASDAQ:CBSH), and Brookdale Senior Living, Inc. (NYSE:BKD). This group of stocks’ market caps are similar to OA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ICLR | 27 | 223656 | 4 |
| CLB | 21 | 134767 | -7 |
| CBSH | 10 | 59897 | 1 |
| BKD | 66 | 2169995 | 2 |
As you can see these stocks had an average of 31 hedge funds with bullish positions and the average amount invested in these stocks was $647 million, while in OA’s case, hedge funds reported $757 million worth of stock in aggregate. Brookdale Senior Living, Inc. (NYSE:BKD) is the most popular stock in this table. On the other hand Commerce Bancshares, Inc. (NASDAQ:CBSH) is the least popular one with only 10 bullish hedge fund positions. Orbital ATK Inc (NYSE:OA) is not the most popular stock in this group, but hedge fund interest is still above average. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BKD might be a better candidate to consider a long position.
