Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by 4 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Ormat Technologies, Inc. (NYSE:ORA).
Ormat Technologies, Inc. (NYSE:ORA) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 9 hedge funds’ portfolios at the end of the second quarter of 2019. 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 Legg Mason, Inc. (NYSE:LM), Vermilion Energy Inc (NYSE:VET), and Cabot Microelectronics Corporation (NASDAQ:CCMP) to gather more data points. Our calculations also showed that ORA isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
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 look at the fresh hedge fund action regarding Ormat Technologies, Inc. (NYSE:ORA).
What have hedge funds been doing with Ormat Technologies, Inc. (NYSE:ORA)?
At the end of the second quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ORA over the last 16 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Impax Asset Management, managed by Ian Simm, holds the number one position in Ormat Technologies, Inc. (NYSE:ORA). Impax Asset Management has a $92.5 million position in the stock, comprising 1.2% of its 13F portfolio. On Impax Asset Management’s heels is Renaissance Technologies which holds a $58.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Noam Gottesman’s GLG Partners, Mario Gabelli’s GAMCO Investors and Ken Griffin’s Citadel Investment Group.
Since Ormat Technologies, Inc. (NYSE:ORA) has faced bearish sentiment from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of money managers that decided to sell off their full holdings heading into Q3. At the top of the heap, Ken Griffin’s Citadel Investment Group sold off the largest investment of all the hedgies watched by Insider Monkey, worth close to $0.4 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund dropped about $0 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to Ormat Technologies, Inc. (NYSE:ORA). We will take a look at Legg Mason, Inc. (NYSE:LM), Vermilion Energy Inc (NYSE:VET), Cabot Microelectronics Corporation (NASDAQ:CCMP), and FTI Consulting, Inc. (NYSE:FCN). This group of stocks’ market caps are similar to ORA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LM | 18 | 448975 | 1 |
| VET | 7 | 9671 | 1 |
| CCMP | 13 | 293721 | -4 |
| FCN | 17 | 128300 | 0 |
| Average | 13.75 | 220167 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $220 million. That figure was $169 million in ORA’s case. Legg Mason, Inc. (NYSE:LM) is the most popular stock in this table. On the other hand Vermilion Energy Inc (NYSE:VET) is the least popular one with only 7 bullish hedge fund positions. Ormat Technologies, Inc. (NYSE:ORA) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on ORA as the stock returned 17.4% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
