We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 835 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of OSI Systems, Inc. (NASDAQ:OSIS).
OSI Systems, Inc. (NASDAQ:OSIS) has experienced a decrease in activity from the world’s largest hedge funds lately. OSIS was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 25 hedge funds in our database with OSIS holdings at the end of the previous quarter. Our calculations also showed that OSIS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Louis Navellier of Navellier & Associates
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to analyze the new hedge fund action regarding OSI Systems, Inc. (NASDAQ:OSIS).
Hedge fund activity in OSI Systems, Inc. (NASDAQ:OSIS)
At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. By comparison, 5 hedge funds held shares or bullish call options in OSIS a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in OSI Systems, Inc. (NASDAQ:OSIS) was held by Arrowstreet Capital, which reported holding $28.5 million worth of stock at the end of September. It was followed by Select Equity Group with a $17.8 million position. Other investors bullish on the company included GLG Partners, Renaissance Technologies, and Citadel Investment Group. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to OSI Systems, Inc. (NASDAQ:OSIS), around 0.16% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, earmarking 0.14 percent of its 13F equity portfolio to OSIS.
Seeing as OSI Systems, Inc. (NASDAQ:OSIS) has experienced falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds who were dropping their full holdings in the third quarter. It’s worth mentioning that Mark Coe’s Intrinsic Edge Capital dropped the largest investment of all the hedgies watched by Insider Monkey, valued at about $19.4 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $11.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 5 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to OSI Systems, Inc. (NASDAQ:OSIS). We will take a look at Silicon Motion Technology Corp. (NASDAQ:SIMO), Primo Water Corporation (NYSE:COT), Constellium SE (NYSE:CSTM), and TTEC Holdings, Inc. (NASDAQ:TTEC). This group of stocks’ market caps match OSIS’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SIMO | 17 | 281949 | 2 |
| COT | 25 | 601347 | -4 |
| CSTM | 50 | 429288 | 3 |
| TTEC | 26 | 63403 | 12 |
| Average | 29.5 | 343997 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $344 million. That figure was $90 million in OSIS’s case. Constellium SE (NYSE:CSTM) is the most popular stock in this table. On the other hand Silicon Motion Technology Corp. (NASDAQ:SIMO) is the least popular one with only 17 bullish hedge fund positions. OSI Systems, Inc. (NASDAQ:OSIS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately OSIS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); OSIS investors were disappointed as the stock returned -33.3% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
