Hedge Funds Have Never Been This Bullish On Old Second Bancorp Inc. (OSBC)

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by more than 6 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Old Second Bancorp Inc. (NASDAQ:OSBC) from the perspective of those elite funds.

Is Old Second Bancorp Inc. (NASDAQ:OSBC) worth your attention right now? Prominent investors are becoming more confident. The number of bullish hedge fund bets moved up by 2 lately. Our calculations also showed that osbc isn’t among the 30 most popular stocks among hedge funds. OSBC was in 12 hedge funds’ portfolios at the end of March. There were 10 hedge funds in our database with OSBC holdings at the end of the previous quarter.

To most stock holders, hedge funds are viewed as unimportant, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our experts choose to focus on the bigwigs of this club, about 750 funds. These investment experts control most of the hedge fund industry’s total capital, and by shadowing their best stock picks, Insider Monkey has identified various investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points annually since its inception in May 2014 through June 18th. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 28.2% since February 2017 (through June 18th) even though the market was up nearly 30% during the same period. We just shared a list of 5 short targets in our latest quarterly update and they are already down an average of 8.2% in a month whereas our long picks outperformed the market by 2.5 percentage points in this volatile 5 week period (our long picks also beat the market by 15 percentage points so far this year).

AlphaOne Capital Partners' Returns, AUM and Holdings

We’re going to take a look at the recent hedge fund action surrounding Old Second Bancorp Inc. (NASDAQ:OSBC).

How have hedgies been trading Old Second Bancorp Inc. (NASDAQ:OSBC)?

Heading into the second quarter of 2019, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in OSBC a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

No of Hedge Funds with OSBC Positions

Among these funds, Renaissance Technologies held the most valuable stake in Old Second Bancorp Inc. (NASDAQ:OSBC), which was worth $13.9 million at the end of the first quarter. On the second spot was Elizabeth Park Capital Management which amassed $7.2 million worth of shares. Moreover, Castine Capital Management, Gillson Capital, and AlphaOne Capital Partners were also bullish on Old Second Bancorp Inc. (NASDAQ:OSBC), allocating a large percentage of their portfolios to this stock.

Consequently, key hedge funds were breaking ground themselves. Citadel Investment Group, managed by Ken Griffin, created the most outsized position in Old Second Bancorp Inc. (NASDAQ:OSBC). Citadel Investment Group had $0.6 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.5 million position during the quarter. The other funds with brand new OSBC positions are Israel Englander’s Millennium Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Old Second Bancorp Inc. (NASDAQ:OSBC) but similarly valued. These stocks are Fidus Investment Corp (NASDAQ:FDUS), Oxford Lane Capital Corp. (NASDAQ:OXLC), Newtek Business Services Corp. (NASDAQ:NEWT), and Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB). This group of stocks’ market caps match OSBC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FDUS 8 11104 1
OXLC 1 1110 0
NEWT 6 6045 0
RRGB 15 47360 1
Average 7.5 16405 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.5 hedge funds with bullish positions and the average amount invested in these stocks was $16 million. That figure was $32 million in OSBC’s case. Red Robin Gourmet Burgers, Inc. (NASDAQ:RRGB) is the most popular stock in this table. On the other hand Oxford Lane Capital Corp. (NASDAQ:OXLC) is the least popular one with only 1 bullish hedge fund positions. Old Second Bancorp Inc. (NASDAQ:OSBC) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately OSBC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OSBC were disappointed as the stock returned 0.7% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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