Did Hedge Funds Make The Right Call On ON Semiconductor Corporation (ON)?

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 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 March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtON Semiconductor Corporation (NASDAQ:ON) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

ON Semiconductor Corporation (NASDAQ:ON) was in 29 hedge funds’ portfolios at the end of March. ON has seen a decrease in activity from the world’s largest hedge funds in recent months. There were 32 hedge funds in our database with ON holdings at the end of the previous quarter. Our calculations also showed that ON 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).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most stock holders, hedge funds are assumed to be underperforming, outdated investment vehicles of the past. While there are greater than 8000 funds in operation at present, Our experts look at the moguls of this group, around 850 funds. These investment experts command the majority of the smart money’s total asset base, and by tailing their matchless investments, Insider Monkey has unsheathed a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Steven Cohen

Steve Cohen of Point72 Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the recent hedge fund action encompassing ON Semiconductor Corporation (NASDAQ:ON).

What does smart money think about ON Semiconductor Corporation (NASDAQ:ON)?

At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ON over the last 18 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, Paradice Investment Management held the most valuable stake in ON Semiconductor Corporation (NASDAQ:ON), which was worth $48.2 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $16.4 million worth of shares. Fisher Asset Management, Millennium Management, and Citadel Investment Group 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 Paradice Investment Management allocated the biggest weight to ON Semiconductor Corporation (NASDAQ:ON), around 5.35% of its 13F portfolio. Maple Rock Capital is also relatively very bullish on the stock, dishing out 1.6 percent of its 13F equity portfolio to ON.

Judging by the fact that ON Semiconductor Corporation (NASDAQ:ON) has witnessed a decline in interest from hedge fund managers, it’s safe to say that there exists a select few hedge funds who were dropping their full holdings by the end of the first quarter. It’s worth mentioning that Kevin Cottrell and Chris LaSusa’s KCL Capital said goodbye to the biggest stake of all the hedgies followed by Insider Monkey, valued at close to $32.9 million in stock. Anthony Bozza’s fund, Lakewood Capital Management, also sold off its stock, about $28.6 million worth. These transactions are important to note, as total hedge fund interest was cut by 3 funds by the end of the first quarter.

Let’s now take a look at hedge fund activity in other stocks similar to ON Semiconductor Corporation (NASDAQ:ON). We will take a look at Aegon N.V. (NYSE:AEG), United Microelectronics Corp (NYSE:UMC), The New York Times Company (NYSE:NYT), and Madison Square Garden Sports Corp. (NYSE:MSG). All of these stocks’ market caps are closest to ON’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AEG 4 16681 -2
UMC 15 98878 1
NYT 33 1414913 -2
MSG 41 1449012 -2
Average 23.25 744871 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $745 million. That figure was $153 million in ON’s case. Madison Square Garden Sports Corp. (NYSE:MSG) is the most popular stock in this table. On the other hand Aegon N.V. (NYSE:AEG) is the least popular one with only 4 bullish hedge fund positions. ON Semiconductor Corporation (NASDAQ:ON) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on ON as the stock returned 59.3% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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