Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of OrthoPediatrics Corp. (NASDAQ:KIDS) based on that data.
Is OrthoPediatrics Corp. (NASDAQ:KIDS) a superb investment today? Hedge funds are selling. The number of bullish hedge fund bets were trimmed by 1 lately. Our calculations also showed that KIDS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
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’ 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
Richard Driehaus of Driehaus Capital
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. Keeping this in mind let’s analyze the recent hedge fund action regarding OrthoPediatrics Corp. (NASDAQ:KIDS).
What does smart money think about OrthoPediatrics Corp. (NASDAQ:KIDS)?
At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -13% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards KIDS over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in OrthoPediatrics Corp. (NASDAQ:KIDS) was held by Driehaus Capital, which reported holding $16.8 million worth of stock at the end of September. It was followed by Pura Vida Investments with a $6.1 million position. Other investors bullish on the company included Royce & Associates, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Pura Vida Investments allocated the biggest weight to OrthoPediatrics Corp. (NASDAQ:KIDS), around 2.13% of its 13F portfolio. Driehaus Capital is also relatively very bullish on the stock, setting aside 0.55 percent of its 13F equity portfolio to KIDS.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Deerfield Management. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified KIDS as a viable investment and initiated a position in the stock.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as OrthoPediatrics Corp. (NASDAQ:KIDS) but similarly valued. These stocks are Synthorx, Inc. (NASDAQ:THOR), eXp World Holdings, Inc. (NASDAQ:EXPI), Repay Holdings Corporation (NASDAQ:RPAY), and Catchmark Timber Trust Inc (NYSE:CTT). This group of stocks’ market values are closest to KIDS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THOR | 7 | 280891 | 0 |
| EXPI | 5 | 4434 | 3 |
| RPAY | 9 | 61061 | -3 |
| CTT | 11 | 63571 | 2 |
| Average | 8 | 102489 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $102 million. That figure was $31 million in KIDS’s case. Catchmark Timber Trust Inc (NYSE:CTT) is the most popular stock in this table. On the other hand eXp World Holdings, Inc. (NASDAQ:EXPI) is the least popular one with only 5 bullish hedge fund positions. OrthoPediatrics Corp. (NASDAQ:KIDS) 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 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 KIDS as the stock returned 11.6% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
