The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at On Deck Capital Inc (NYSE:ONDK) from the perspective of those elite funds.
On Deck Capital Inc (NYSE:ONDK) investors should pay attention to an increase in hedge fund interest in recent months. Our calculations also showed that ONDK isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s go over the latest hedge fund action surrounding On Deck Capital Inc (NYSE:ONDK).
What have hedge funds been doing with On Deck Capital Inc (NYSE:ONDK)?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 24% from the second quarter of 2018. On the other hand, there were a total of 15 hedge funds with a bullish position in ONDK at the beginning of this year. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Portolan Capital Management held the most valuable stake in On Deck Capital Inc (NYSE:ONDK), which was worth $30.7 million at the end of the third quarter. On the second spot was Nantahala Capital Management which amassed $28.8 million worth of shares. Moreover, Renaissance Technologies, 683 Capital Partners, and EJF Capital were also bullish on On Deck Capital Inc (NYSE:ONDK), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, key money managers were leading the bulls’ herd. Columbus Circle Investors, managed by Principal Global Investors, assembled the largest position in On Deck Capital Inc (NYSE:ONDK). Columbus Circle Investors had $7.6 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $0.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Peter Algert and Kevin Coldiron’s Algert Coldiron Investors, Jeffrey Talpins’s Element Capital Management, and Mike Vranos’s Ellington.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as On Deck Capital Inc (NYSE:ONDK) but similarly valued. These stocks are Access National Corporation (NASDAQ:ANCX), Community Healthcare Trust Inc (NYSE:CHCT), Putnam Premier Income Trust (NYSE:PPT), and Tejon Ranch Company (NYSE:TRC). This group of stocks’ market valuations resemble ONDK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ANCX | 3 | 16165 | 0 |
| CHCT | 9 | 65636 | -1 |
| PPT | 1 | 69 | -2 |
| TRC | 10 | 107861 | -2 |
| Average | 5.75 | 47433 | -1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $47 million. That figure was $164 million in ONDK’s case. Tejon Ranch Company (NYSE:TRC) is the most popular stock in this table. On the other hand Putnam Premier Income Trust (NYSE:PPT) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks On Deck Capital Inc (NYSE:ONDK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
