Hedge Funds Cashing Out Of ON Semiconductor Corporation (ON)

Is ON Semiconductor Corporation (NASDAQ:ON) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

ON Semiconductor Corporation (NASDAQ:ON) has seen a decrease in hedge fund interest recently. ON Semiconductor Corporation (NASDAQ:ON) was in 41 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 45. There were 45 hedge funds in our database with ON positions at the end of the fourth quarter. Our calculations also showed that ON isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeff Smith

Jeffrey Smith of Starboard Value LP

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Keeping this in mind we’re going to view the fresh hedge fund action encompassing ON Semiconductor Corporation (NASDAQ:ON).

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

At first quarter’s end, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. On the other hand, there were a total of 29 hedge funds with a bullish position in ON a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Starboard Value LP held the most valuable stake in ON Semiconductor Corporation (NASDAQ:ON), which was worth $356.6 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $188.9 million worth of shares. Newbrook Capital Advisors, Duquesne Capital, and Jericho Capital Asset Management 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 Stamina Capital Management allocated the biggest weight to ON Semiconductor Corporation (NASDAQ:ON), around 9.63% of its 13F portfolio. Starboard Value LP is also relatively very bullish on the stock, designating 7.61 percent of its 13F equity portfolio to ON.

Because ON Semiconductor Corporation (NASDAQ:ON) has experienced falling interest from the entirety of the hedge funds we track, we can see that there exists a select few money managers that decided to sell off their positions entirely by the end of the first quarter. At the top of the heap, Benjamin Pass’s TOMS Capital dumped the biggest position of the 750 funds followed by Insider Monkey, worth close to $29.4 million in stock. Zach Schreiber’s fund, Point State Capital, also dumped its stock, about $24.4 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 4 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to ON Semiconductor Corporation (NASDAQ:ON). These stocks are Quest Diagnostics Incorporated (NYSE:DGX), Bio-Rad Laboratories, Inc. (NYSE:BIO), Celanese Corporation (NYSE:CE), Healthpeak Properties, Inc. (NYSE:PEAK), Albemarle Corporation (NYSE:ALB), Rollins, Inc. (NYSE:ROL), and Raymond James Financial, Inc. (NYSE:RJF). This group of stocks’ market values are closest to ON’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DGX 34 485336 -11
BIO 44 890995 2
CE 36 759047 3
PEAK 18 264899 -4
ALB 31 262992 10
ROL 30 643375 2
RJF 33 749300 -1
Average 32.3 579421 0.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.3 hedge funds with bullish positions and the average amount invested in these stocks was $579 million. That figure was $1279 million in ON’s case. Bio-Rad Laboratories, Inc. (NYSE:BIO) is the most popular stock in this table. On the other hand Healthpeak Properties, Inc. (NYSE:PEAK) is the least popular one with only 18 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 overall hedge fund sentiment score for ON is 72.6. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately ON wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ON were disappointed as the stock returned -14% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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