Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to On Assignment, Inc. (NYSE:ASGN) changed recently.
On Assignment, Inc. (NYSE:ASGN) investors should pay attention to a decrease in enthusiasm from smart money in recent months. ASGN was in 14 hedge funds’ portfolios at the end of the third quarter of 2019. There were 21 hedge funds in our database with ASGN holdings at the end of the previous quarter. Our calculations also showed that ASGN isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a look at the latest hedge fund action encompassing On Assignment, Inc. (NYSE:ASGN).
What does smart money think about On Assignment, Inc. (NYSE:ASGN)?
Heading into the fourth quarter of 2019, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ASGN over the last 17 quarters. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Robert Joseph Caruso’s Select Equity Group has the most valuable position in On Assignment, Inc. (NYSE:ASGN), worth close to $60.1 million, comprising 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $46.3 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism include Israel Englander’s Millennium Management, Noam Gottesman’s GLG Partners and Paul Marshall and Ian Wace’s Marshall Wace. In terms of the portfolio weights assigned to each position Brant Point Investment Management allocated the biggest weight to On Assignment, Inc. (NYSE:ASGN), around 0.69% of its 13F portfolio. Select Equity Group is also relatively very bullish on the stock, designating 0.41 percent of its 13F equity portfolio to ASGN.
Due to the fact that On Assignment, Inc. (NYSE:ASGN) has witnessed falling interest from the entirety of the hedge funds we track, logic holds that there was a specific group of hedgies that decided to sell off their full holdings by the end of the third quarter. Interestingly, Jeff Lignelli’s Incline Global Management dropped the biggest stake of all the hedgies monitored by Insider Monkey, worth about $27.5 million in stock. Renaissance Technologies, also cut its stock, about $13.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 7 funds by the end of the third quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as On Assignment, Inc. (NYSE:ASGN) but similarly valued. These stocks are Corporate Office Properties Trust (NYSE:OFC), American National Insurance Company (NASDAQ:ANAT), Cornerstone OnDemand, Inc. (NASDAQ:CSOD), and Allogene Therapeutics, Inc. (NASDAQ:ALLO). All of these stocks’ market caps are closest to ASGN’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 14.25 hedge funds with bullish positions and the average amount invested in these stocks was $270 million. That figure was $177 million in ASGN’s case. Cornerstone OnDemand, Inc. (NASDAQ:CSOD) is the most popular stock in this table. On the other hand Allogene Therapeutics, Inc. (NASDAQ:ALLO) is the least popular one with only 5 bullish hedge fund positions. On Assignment, Inc. (NYSE:ASGN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on ASGN, though not to the same extent, as the stock returned 6.6% during the first two months of the fourth quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.