Were Hedge Funds Right About Orchard Therapeutics plc (ORTX)?
Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with M(BA)s and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Orchard Therapeutics plc (NASDAQ:ORTX).
Orchard Therapeutics plc (NASDAQ:ORTX) was in 17 hedge funds’ portfolios at the end of March. The all time high for this statistic is 22. ORTX shareholders have witnessed an increase in hedge fund sentiment recently. There were 15 hedge funds in our database with ORTX holdings at the end of December. Our calculations also showed that ORTX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Marshall of Marshall Wace
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Now let’s take a gander at the fresh hedge fund action encompassing Orchard Therapeutics plc (NASDAQ:ORTX).
Do Hedge Funds Think ORTX Is A Good Stock To Buy Now?
At first quarter’s end, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ORTX over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
More specifically, RA Capital Management was the largest shareholder of Orchard Therapeutics plc (NASDAQ:ORTX), with a stake worth $69.2 million reported as of the end of March. Trailing RA Capital Management was Deerfield Management, which amassed a stake valued at $50.5 million. Farallon Capital, Casdin Capital, and Sphera Global Healthcare Fund were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Copernicus Capital Management allocated the biggest weight to Orchard Therapeutics plc (NASDAQ:ORTX), around 1.76% of its 13F portfolio. Deerfield Management is also relatively very bullish on the stock, designating 1.06 percent of its 13F equity portfolio to ORTX.
Now, some big names were breaking ground themselves. Farallon Capital, created the biggest position in Orchard Therapeutics plc (NASDAQ:ORTX). Farallon Capital had $23.3 million invested in the company at the end of the quarter. Eli Casdin’s Casdin Capital also made a $23.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund, Neil Shahrestani’s Ikarian Capital, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Orchard Therapeutics plc (NASDAQ:ORTX) but similarly valued. We will take a look at Camden National Corporation (NASDAQ:CAC), Seritage Growth Properties (NYSE:SRG), Petmed Express Inc (NASDAQ:PETS), Myers Industries, Inc. (NYSE:MYE), Genesco Inc. (NYSE:GCO), CrossFirst Bankshares, Inc. (NASDAQ:CFB), and Vaxart, Inc. (NASDAQ:VXRT). All of these stocks’ market caps resemble ORTX’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CAC,15,48135,-1 SRG,10,128550,-4 PETS,14,69468,-8 MYE,10,105798,0 GCO,15,62554,0 CFB,5,14567,-2 VXRT,6,5814,-3 Average,10.7,62127,-2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.7 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $205 million in ORTX’s case. Camden National Corporation (NASDAQ:CAC) is the most popular stock in this table. On the other hand CrossFirst Bankshares, Inc. (NASDAQ:CFB) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Orchard Therapeutics plc (NASDAQ:ORTX) is more popular among hedge funds. Our overall hedge fund sentiment score for ORTX is 80.2. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately ORTX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ORTX were disappointed as the stock returned -57.9% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.