In this article we will take a look at whether hedge funds think OrthoPediatrics Corp. (NASDAQ:KIDS) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is OrthoPediatrics Corp. (NASDAQ:KIDS) a bargain? Money managers are in a pessimistic mood. The number of bullish hedge fund bets were trimmed by 4 in recent months. Our calculations also showed that KIDS isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). KIDS was in 7 hedge funds' portfolios at the end of the first quarter of 2020. There were 11 hedge funds in our database with KIDS holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_221556" align="aligncenter" width="396"] Richard Driehaus of Driehaus Capital[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let's take a look at the fresh hedge fund action surrounding OrthoPediatrics Corp. (NASDAQ:KIDS).
What does smart money think about OrthoPediatrics Corp. (NASDAQ:KIDS)?
Heading into the second quarter of 2020, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -36% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KIDS over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Driehaus Capital, managed by Richard Driehaus, holds the number one position in OrthoPediatrics Corp. (NASDAQ:KIDS). Driehaus Capital has a $20.1 million position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is Burrage Capital Management, led by Christiana Goh Bardon, holding a $6.7 million position; the fund has 6.6% of its 13F portfolio invested in the stock. Other peers with similar optimism encompass Efrem Kamen's Pura Vida Investments, Chuck Royce's Royce & Associates and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Burrage Capital Management allocated the biggest weight to OrthoPediatrics Corp. (NASDAQ:KIDS), around 6.57% of its 13F portfolio. Pura Vida Investments is also relatively very bullish on the stock, setting aside 1.5 percent of its 13F equity portfolio to KIDS.
Due to the fact that OrthoPediatrics Corp. (NASDAQ:KIDS) has experienced a decline in interest from the aggregate hedge fund industry, it's easy to see that there was a specific group of hedgies that elected to cut their full holdings by the end of the first quarter. It's worth mentioning that James E. Flynn's Deerfield Management cut the biggest stake of all the hedgies followed by Insider Monkey, worth close to $10.6 million in stock, and Greg Martinez's Parkman Healthcare Partners was right behind this move, as the fund dropped about $2.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds by the end of the first quarter.
Let's also examine hedge fund activity in other stocks similar to OrthoPediatrics Corp. (NASDAQ:KIDS). These stocks are Mr. Cooper Group Inc. (NASDAQ:COOP), Nordic American Tankers Ltd (NYSE:NAT), Photronics, Inc. (NASDAQ:PLAB), and PAE Incorporated (NASDAQ:PAE). This group of stocks' market values match KIDS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position COOP,19,177754,-4 NAT,12,25618,-2 PLAB,22,89664,1 PAE,21,124295,9 Average,18.5,104333,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $43 million in KIDS's case. Photronics, Inc. (NASDAQ:PLAB) is the most popular stock in this table. On the other hand Nordic American Tankers Ltd (NYSE:NAT) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks OrthoPediatrics Corp. (NASDAQ:KIDS) is even less popular than NAT. Hedge funds dodged a bullet by taking a bearish stance towards KIDS. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.9% in 2020 through June 10th but managed to beat the market by 14.2 percentage points. Unfortunately KIDS wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); KIDS investors were disappointed as the stock returned 22.7% during the second quarter (through June 10th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
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