Do Hedge Funds Love Onto Innovation Inc. (ONTO)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Onto Innovation Inc. (NYSE:ONTO) changed recently.

Onto Innovation Inc. (NYSE:ONTO) shareholders have witnessed a decrease in enthusiasm from smart money of late. Onto Innovation Inc. (NYSE:ONTO) was in 21 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 25. There were 25 hedge funds in our database with ONTO positions at the end of the second quarter. Our calculations also showed that ONTO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a glance at the new hedge fund action regarding Onto Innovation Inc. (NYSE:ONTO).

Do Hedge Funds Think ONTO Is A Good Stock To Buy Now?

At third quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in ONTO a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fisher Asset Management, managed by Ken Fisher, holds the largest position in Onto Innovation Inc. (NYSE:ONTO). Fisher Asset Management has a $85.1 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $45.3 million position; 0.3% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism consist of Roy Vermus and Shlomi Bracha’s Noked Capital, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Tim Curro’s Value Holdings LP. In terms of the portfolio weights assigned to each position Noked Capital allocated the biggest weight to Onto Innovation Inc. (NYSE:ONTO), around 9.83% of its 13F portfolio. Value Holdings LP is also relatively very bullish on the stock, designating 3.09 percent of its 13F equity portfolio to ONTO.

Due to the fact that Onto Innovation Inc. (NYSE:ONTO) has witnessed declining sentiment from the smart money, it’s safe to say that there lies a certain “tier” of hedgies that slashed their positions entirely last quarter. Interestingly, Doron Breen and Mori Arkin’s Sphera Global Healthcare Fund sold off the largest investment of the 750 funds followed by Insider Monkey, totaling close to $7.9 million in stock. Paul Holland and Matthew Miller’s fund, Glaxis Capital Management, also cut its stock, about $4.5 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 4 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Onto Innovation Inc. (NYSE:ONTO) but similarly valued. We will take a look at The Macerich Company (NYSE:MAC), Dillard’s, Inc. (NYSE:DDS), LXP Industrial Trust (NYSE:LXP), Lyell Immunopharma Inc. (NASDAQ:LYEL), iHeartMedia, Inc. (NASDAQ:IHRT), FirstCash Holdings, Inc (NASDAQ:FCFS), and Enable Midstream Partners LP (NYSE:ENBL). This group of stocks’ market valuations are closest to ONTO’s market valuation.

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As you can see these stocks had an average of 14.4 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $270 million in ONTO’s case. iHeartMedia, Inc. (NASDAQ:IHRT) is the most popular stock in this table. On the other hand Enable Midstream Partners LP (NYSE:ENBL) is the least popular one with only 1 bullish hedge fund positions. Onto Innovation Inc. (NYSE:ONTO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ONTO is 63.2. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on ONTO as the stock returned 40.1% since the end of Q3 (through 12/31) 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.