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Hedge Funds Are Selling Old National Bancorp (ONB)

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost a third of its value since the end of July. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2018 yielded an average return of 6.7% year-to-date, vs. a gain of 2.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Old National Bancorp (NYSE:ONB).

Is Old National Bancorp (NYSE:ONB) a bargain? Hedge funds are in a pessimistic mood. The number of bullish hedge fund bets decreased by 2 lately. Our calculations also showed that ONB isn’t among the 30 most popular stocks among hedge funds. ONB was in 6 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with ONB holdings at the end of the previous quarter.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Dmitry Balyasny

Let’s analyze the key hedge fund action regarding Old National Bancorp (NYSE:ONB).

Hedge fund activity in Old National Bancorp (NYSE:ONB)

At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the second quarter of 2018. On the other hand, there were a total of 10 hedge funds with a bullish position in ONB at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds ONB Positions

Of the funds tracked by Insider Monkey, Matthew Lindenbaum’s Basswood Capital has the number one position in Old National Bancorp (NYSE:ONB), worth close to $10.7 million, comprising 0.5% of its total 13F portfolio. The second most bullish fund manager is Balyasny Asset Management, managed by Dmitry Balyasny, which holds a $5.8 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Gregg J. Powers’s Private Capital Management, Noam Gottesman’s GLG Partners and Cliff Asness’s AQR Capital Management.

Because Old National Bancorp (NYSE:ONB) has faced bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers that decided to sell off their full holdings heading into Q3. Interestingly, Ken Grossman and Glen Schneider’s SG Capital Management said goodbye to the largest investment of the 700 funds watched by Insider Monkey, worth an estimated $11.7 million in stock, and Jim Simons’s Renaissance Technologies was right behind this move, as the fund sold off about $4.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into Q3.

Let’s now review hedge fund activity in other stocks similar to Old National Bancorp (NYSE:ONB). These stocks are Terex Corporation (NYSE:TEX), Colliers International Group Inc (NASDAQ:CIGI), Floor & Decor Holdings, Inc. (NYSE:FND), and Fulton Financial Corp (NASDAQ:FULT). This group of stocks’ market values are similar to ONB’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TEX 21 474766 0
CIGI 11 274919 0
FND 25 278970 11
FULT 12 40945 4
Average 17.25 267400 3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $267 million. That figure was $25 million in ONB’s case. Floor & Decor Holdings, Inc. (NYSE:FND) is the most popular stock in this table. On the other hand Colliers International Group Inc (NASDAQ:CIGI) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Old National Bancorp (NYSE:ONB) is even less popular than CIGI. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

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

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