Where Do Hedge Funds Stand On Orchid Island Capital, Inc. (ORC)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Orchid Island Capital, Inc. (NYSE:ORC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Hedge fund interest in Orchid Island Capital, Inc. (NYSE:ORC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that ORC 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). At the end of this article we will also compare ORC to other stocks including Osmotica Pharmaceuticals plc (NASDAQ:OSMT), HF Foods Group Inc. (NASDAQ:HFFG), and Cytosorbents Corp (NASDAQ:CTSO) to get a better sense of its popularity.

Video: 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 S&P 500 ETFs by 66 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 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.

David E. Shaw of D.E. Shaw

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 10 most profitable companies in the world 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. With all of this in mind we’re going to take a look at the latest hedge fund action encompassing Orchid Island Capital, Inc. (NYSE:ORC).

What does smart money think about Orchid Island Capital, Inc. (NYSE:ORC)?

At Q3’s end, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ORC over the last 21 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Renaissance Technologies, holds the number one position in Orchid Island Capital, Inc. (NYSE:ORC). Renaissance Technologies has a $6.5 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is David Harding of Winton Capital Management, with a $2.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism consist of John Overdeck and David Siegel’s Two Sigma Advisors, and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Winton Capital Management allocated the biggest weight to Orchid Island Capital, Inc. (NYSE:ORC), around 0.07% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.01 percent of its 13F equity portfolio to ORC.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: ExodusPoint Capital. 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 only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was D E Shaw).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Orchid Island Capital, Inc. (NYSE:ORC) but similarly valued. We will take a look at Osmotica Pharmaceuticals plc (NASDAQ:OSMT), HF Foods Group Inc. (NASDAQ:HFFG), Cytosorbents Corp (NASDAQ:CTSO), Bridge Bancorp, Inc. (NASDAQ:BDGE), Crawford & Company (NYSE:CRD), Vishay Precision Group Inc (NYSE:VPG), and Wanda Sports Group Company Limited (NASDAQ:WSG). All of these stocks’ market caps are similar to ORC’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.4 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $11 million in ORC’s case. Vishay Precision Group Inc (NYSE:VPG) is the most popular stock in this table. On the other hand HF Foods Group Inc. (NASDAQ:HFFG) is the least popular one with only 2 bullish hedge fund positions. Orchid Island Capital, Inc. (NYSE:ORC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ORC is 27.7. 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. 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 ORC as the stock returned 12.1% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.