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OneMain Holdings Inc (OMF): Reading Hedge Fund Tea Leaves

Is OneMain Holdings Inc (NYSE:OMF) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is OneMain Holdings Inc (NYSE:OMF) undervalued? The smart money is in a bearish mood. The number of long hedge fund positions shrunk by 1 in recent months. Our calculations also showed that OMF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). OMF was in 26 hedge funds’ portfolios at the end of September. There were 27 hedge funds in our database with OMF holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

Matthew Lindenbaum Basswood Capital

Matthew Lindenbaum of Basswood Capital

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to review the latest hedge fund action regarding OneMain Holdings Inc (NYSE:OMF).

How have hedgies been trading OneMain Holdings Inc (NYSE:OMF)?

At Q3’s end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the previous quarter. On the other hand, there were a total of 26 hedge funds with a bullish position in OMF a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

OMF_dec2019

More specifically, Miller Value Partners was the largest shareholder of OneMain Holdings Inc (NYSE:OMF), with a stake worth $100.1 million reported as of the end of September. Trailing Miller Value Partners was Basswood Capital, which amassed a stake valued at $68.7 million. Renaissance Technologies, Millennium Management, and Adage Capital Management 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 Second Curve Capital allocated the biggest weight to OneMain Holdings Inc (NYSE:OMF), around 5.96% of its portfolio. Basswood Capital is also relatively very bullish on the stock, setting aside 5.02 percent of its 13F equity portfolio to OMF.

Because OneMain Holdings Inc (NYSE:OMF) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there is a sect of funds that slashed their full holdings by the end of the third quarter. At the top of the heap, Donald Sussman’s Paloma Partners dropped the biggest stake of all the hedgies tracked by Insider Monkey, totaling about $1.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $0.8 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 1 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to OneMain Holdings Inc (NYSE:OMF). These stocks are Wyndham Hotels & Resorts, Inc. (NYSE:WH), Hawaiian Electric Industries, Inc. (NYSE:HE), Nutanix, Inc. (NASDAQ:NTNX), and Companhia Energetica Minas Gerais (NYSE:CIG). This group of stocks’ market caps match OMF’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WH 36 800953 -4
HE 14 189464 -3
NTNX 24 320502 -1
CIG 8 54517 0
Average 20.5 341359 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $341 million. That figure was $399 million in OMF’s case. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is the most popular stock in this table. On the other hand Companhia Energetica Minas Gerais (NYSE:CIG) is the least popular one with only 8 bullish hedge fund positions. OneMain Holdings Inc (NYSE:OMF) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on OMF as the stock returned 18.2% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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