Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Old Second Bancorp Inc. (NASDAQ:OSBC).
Is OSBC a good stock to buy now? Old Second Bancorp Inc. (NASDAQ:OSBC) investors should be aware of a decrease in enthusiasm from smart money of late. Old Second Bancorp Inc. (NASDAQ:OSBC) was in 10 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 12. Our calculations also showed that OSBC 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.
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 S&P 500 ETFs by 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.
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 let’s review the fresh hedge fund action surrounding Old Second Bancorp Inc. (NASDAQ:OSBC).
Do Hedge Funds Think OSBC Is A Good Stock To Buy Now?
At the end of September, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OSBC over the last 21 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Old Second Bancorp Inc. (NASDAQ:OSBC) was held by Renaissance Technologies, which reported holding $7.9 million worth of stock at the end of September. It was followed by Arrowstreet Capital with a $1.3 million position. Other investors bullish on the company included Mendon Capital Advisors, Citadel Investment Group, and Winton Capital Management. In terms of the portfolio weights assigned to each position Mendon Capital Advisors allocated the biggest weight to Old Second Bancorp Inc. (NASDAQ:OSBC), around 0.67% of its 13F portfolio. Fourthstone LLC is also relatively very bullish on the stock, setting aside 0.13 percent of its 13F equity portfolio to OSBC.
Judging by the fact that Old Second Bancorp Inc. (NASDAQ:OSBC) has faced bearish sentiment from the smart money, it’s safe to say that there lies a certain “tier” of hedge funds that elected to cut their full holdings in the third quarter. At the top of the heap, Israel Englander’s Millennium Management cut the largest position of the 750 funds tracked by Insider Monkey, totaling an estimated $0.5 million in stock. Roger Ibbotson’s fund, Zebra Capital Management, also cut its stock, about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
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 U.S. Silica Holdings Inc (NYSE:SLCA), Fly Leasing Ltd (NYSE:FLY), Ruhnn Holding Limited (NASDAQ:RUHN), GreenPower Motor Company Inc. (NASDAQ:GP), Matrix Service Co (NASDAQ:MTRX), NN, Inc. (NASDAQ:NNBR), and Retractable Technologies, Inc. (NYSE:RVP). This group of stocks’ market caps are closest to OSBC’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 7.4 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $12 million in OSBC’s case. U.S. Silica Holdings Inc (NYSE:SLCA) is the most popular stock in this table. On the other hand GreenPower Motor Company Inc. (NASDAQ:GP) is the least popular one with only 2 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. Our overall hedge fund sentiment score for OSBC is 56.6. 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. 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. Hedge funds were also right about betting on OSBC as the stock returned 39.4% since the end of Q3 (through 12/8) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.