At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Old National Bancorp (NYSE:ONB) makes for a good investment right now.
Is Old National Bancorp (NYSE:ONB) a worthy investment today? The smart money was selling. The number of bullish hedge fund bets dropped by 3 lately. Old National Bancorp (NYSE:ONB) was in 14 hedge funds’ portfolios at the end of September. The all time high for this statistic is 17. Our calculations also showed that ONB isn’t among the 30 most popular stocks among hedge funds (click for Q3 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 66 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, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. Keeping this in mind we’re going to take a glance at the fresh hedge fund action surrounding Old National Bancorp (NYSE:ONB).
Do Hedge Funds Think ONB Is A Good Stock To Buy Now?
At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 11 hedge funds with a bullish position in ONB 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.
More specifically, GLG Partners was the largest shareholder of Old National Bancorp (NYSE:ONB), with a stake worth $7.5 million reported as of the end of September. Trailing GLG Partners was Basswood Capital, which amassed a stake valued at $6.9 million. Citadel Investment Group, JCSD Capital, and Citadel Investment Group 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 JCSD Capital allocated the biggest weight to Old National Bancorp (NYSE:ONB), around 1.53% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 0.58 percent of its 13F equity portfolio to ONB.
Due to the fact that Old National Bancorp (NYSE:ONB) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there exists a select few fund managers that decided to sell off their entire stakes by the end of the third quarter. At the top of the heap, Brandon Haley’s Holocene Advisors dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, worth an estimated $0.8 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also cut its stock, about $0.7 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Old National Bancorp (NYSE:ONB). We will take a look at SPX Corporation (NYSE:SPXC), Canadian Solar Inc. (NASDAQ:CSIQ), Coty Inc (NYSE:COTY), Plexus Corp. (NASDAQ:PLXS), Sabre Corporation (NASDAQ:SABR), Tootsie Roll Industries, Inc. (NYSE:TR), and Karuna Therapeutics, Inc. (NASDAQ:KRTX). This group of stocks’ market caps resemble 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 21 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $21 million in ONB’s case. Sabre Corporation (NASDAQ:SABR) is the most popular stock in this table. On the other hand SPX Corporation (NYSE:SPXC) is the least popular one with only 13 bullish hedge fund positions. Old National Bancorp (NYSE:ONB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ONB is 29.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on ONB as the stock returned 32.4% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.