Hedge Funds Aren’t Crazy About Old Republic International Corporation (ORI) Anymore

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 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. In this article we look at what those investors think of Old Republic International Corporation (NYSE:ORI).

Is Old Republic International Corporation (NYSE:ORI) going to take off soon? Investors who are in the know were reducing their bets on the stock. The number of long hedge fund positions were cut by 3 recently. Old Republic International Corporation (NYSE:ORI) was in 24 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 31. Our calculations also showed that ORI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

Jeffrey Altman Owl Creek

Jeffrey Altman of Owl Creek Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s take a look at the recent hedge fund action surrounding Old Republic International Corporation (NYSE:ORI).

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

At first quarter’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the fourth quarter of 2020. By comparison, 27 hedge funds held shares or bullish call options in ORI a year ago. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

The largest stake in Old Republic International Corporation (NYSE:ORI) was held by Owl Creek Asset Management, which reported holding $139 million worth of stock at the end of December. It was followed by Royce & Associates with a $48.2 million position. Other investors bullish on the company included AQR Capital Management, Arrowstreet Capital, and Third Avenue Management. In terms of the portfolio weights assigned to each position Owl Creek Asset Management allocated the biggest weight to Old Republic International Corporation (NYSE:ORI), around 4.7% of its 13F portfolio. Third Avenue Management is also relatively very bullish on the stock, designating 3.22 percent of its 13F equity portfolio to ORI.

Because Old Republic International Corporation (NYSE:ORI) has faced a decline in interest from hedge fund managers, it’s safe to say that there were a few funds that elected to cut their positions entirely in the first quarter. Intriguingly, Israel Englander’s Millennium Management cut the largest investment of the 750 funds monitored by Insider Monkey, comprising close to $6 million in stock, and Brandon Haley’s Holocene Advisors was right behind this move, as the fund cut about $4.4 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds in the first quarter.

Let’s check out hedge fund activity in other stocks similar to Old Republic International Corporation (NYSE:ORI). We will take a look at Rexford Industrial Realty Inc (NYSE:REXR), Boyd Gaming Corporation (NYSE:BYD), Shift4 Payments, Inc. (NYSE:FOUR), Cameco Corporation (NYSE:CCJ), CDK Global Inc (NASDAQ:CDK), Skechers USA Inc (NYSE:SKX), and Plains All American Pipeline, L.P. (NASDAQ:PAA). This group of stocks’ market valuations are similar to ORI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REXR 13 75514 -4
BYD 22 299026 -6
FOUR 33 538716 -5
CCJ 30 492804 5
CDK 18 298124 -9
SKX 29 531729 -2
PAA 7 57037 -3
Average 21.7 327564 -3.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.7 hedge funds with bullish positions and the average amount invested in these stocks was $328 million. That figure was $377 million in ORI’s case. Shift4 Payments, Inc. (NYSE:FOUR) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NASDAQ:PAA) is the least popular one with only 7 bullish hedge fund positions. Old Republic International Corporation (NYSE:ORI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ORI is 57.9. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on ORI, though not to the same extent, as the stock returned 12% since Q1 (through July 16th) and outperformed the market as well.

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