At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Old National Bancorp (NASDAQ:ONB).
Old National Bancorp (NASDAQ:ONB) has experienced an increase in support from the world’s most elite money managers of late. ONB was in 15 hedge funds’ portfolios at the end of the first quarter of 2020. There were 14 hedge funds in our database with ONB holdings at the end of the previous quarter. Our calculations also showed that ONB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 58 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 best imported beer in 2020 to identify emerging trends that are likely to lead to 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the fresh hedge fund action regarding Old National Bancorp (NASDAQ:ONB).
How are hedge funds trading Old National Bancorp (NASDAQ:ONB)?
Heading into the second quarter of 2020, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from one quarter earlier. By comparison, 9 hedge funds held shares or bullish call options in ONB a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Old National Bancorp (NASDAQ:ONB) was held by Citadel Investment Group, which reported holding $9.1 million worth of stock at the end of September. It was followed by Basswood Capital with a $7.3 million position. Other investors bullish on the company included Millennium Management, PEAK6 Capital Management, and GLG Partners. In terms of the portfolio weights assigned to each position Basswood Capital allocated the biggest weight to Old National Bancorp (NASDAQ:ONB), around 0.85% of its 13F portfolio. Neo Ivy Capital is also relatively very bullish on the stock, dishing out 0.37 percent of its 13F equity portfolio to ONB.
Consequently, some big names were leading the bulls’ herd. GLG Partners, managed by Noam Gottesman, initiated the biggest position in Old National Bancorp (NASDAQ:ONB). GLG Partners had $2.9 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 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 Steve Cohen’s Point72 Asset Management, Minhua Zhang’s Weld Capital Management, and Greg Eisner’s Engineers Gate Manager.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Old National Bancorp (NASDAQ:ONB) but similarly valued. We will take a look at HMS Holdings Corp. (NASDAQ:HMSY), LiveRamp Holdings, Inc. (NYSE:RAMP), Piedmont Office Realty Trust, Inc. (NYSE:PDM), and 1Life Healthcare, Inc. (NASDAQ:ONEM). All of these stocks’ market caps match ONB’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $20 million in ONB’s case. HMS Holdings Corp. (NASDAQ:HMSY) is the most popular stock in this table. On the other hand Piedmont Office Realty Trust, Inc. (NYSE:PDM) is the least popular one with only 7 bullish hedge fund positions. Old National Bancorp (NASDAQ:ONB) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately ONB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ONB were disappointed as the stock returned 3% during the same time 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 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.