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ON Semiconductor Corporation (ON): Hedge Funds Are Snapping Up

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of ON Semiconductor Corporation (NASDAQ:ON) based on that data and determine whether they were really smart about the stock.

ON Semiconductor Corporation (NASDAQ:ON) investors should be aware of an increase in enthusiasm from smart money lately. ON Semiconductor Corporation (NASDAQ:ON) was in 32 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 39. Our calculations also showed that ON isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

CITADEL INVESTMENT GROUP

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to analyze the key hedge fund action surrounding ON Semiconductor Corporation (NASDAQ:ON).

What does smart money think about ON Semiconductor Corporation (NASDAQ:ON)?

At the end of June, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 10% from the first quarter of 2020. On the other hand, there were a total of 26 hedge funds with a bullish position in ON a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in ON Semiconductor Corporation (NASDAQ:ON) was held by Holocene Advisors, which reported holding $109.5 million worth of stock at the end of September. It was followed by Paradice Investment Management with a $80.4 million position. Other investors bullish on the company included Jericho Capital Asset Management, Millennium Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to ON Semiconductor Corporation (NASDAQ:ON), around 6.05% of its 13F portfolio. Jericho Capital Asset Management is also relatively very bullish on the stock, setting aside 2.9 percent of its 13F equity portfolio to ON.

As industrywide interest jumped, key hedge funds have jumped into ON Semiconductor Corporation (NASDAQ:ON) headfirst. Holocene Advisors, managed by Brandon Haley, established the most outsized position in ON Semiconductor Corporation (NASDAQ:ON). Holocene Advisors had $109.5 million invested in the company at the end of the quarter. Josh Resnick’s Jericho Capital Asset Management also made a $74.1 million investment in the stock during the quarter. The following funds were also among the new ON investors: Israel Englander’s Millennium Management, Martin Taylor’s Crake Asset Management, and Brian Ashford-Russell and Tim Woolley’s Polar Capital.

Let’s also examine hedge fund activity in other stocks similar to ON Semiconductor Corporation (NASDAQ:ON). These stocks are InterContinental Hotels Group PLC (NYSE:IHG), Pegasystems Inc. (NASDAQ:PEGA), American Homes 4 Rent (NYSE:AMH), 58.com Inc (NYSE:WUBA), Whirlpool Corporation (NYSE:WHR), Wynn Resorts, Limited (NASDAQ:WYNN), and Guardant Health, Inc. (NASDAQ:GH). This group of stocks’ market valuations resemble ON’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
IHG 5 5206 1
PEGA 28 1451413 -5
AMH 23 232272 2
WUBA 34 1203516 13
WHR 26 800208 1
WYNN 45 587255 5
GH 36 767641 9
Average 28.1 721073 3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $721 million. That figure was $505 million in ON’s case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 5 bullish hedge fund positions. ON Semiconductor Corporation (NASDAQ:ON) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ON is 66.4. 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 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 23.8% in 2020 through September 14th and still beat the market by 17.6 percentage points. Hedge funds were also right about betting on ON as the stock returned 11% during Q3 (through September 14th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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