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Should You Avoid Old Dominion Freight Line, Inc. (ODFL)?

In this article we will take a look at whether hedge funds think Old Dominion Freight Line, Inc. (NASDAQ:ODFL) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Old Dominion Freight Line, Inc. (NASDAQ:ODFL) a good stock to buy now? Hedge funds are getting less optimistic. The number of long hedge fund bets were trimmed by 1 recently. Our calculations also showed that ODFL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). ODFL was in 33 hedge funds’ portfolios at the end of March. There were 34 hedge funds in our database with ODFL positions at the end of the previous quarter.

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 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 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.

Jonathan Barrett Luminus Management

Jonathan Barrett of Luminus Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the key hedge fund action encompassing Old Dominion Freight Line, Inc. (NASDAQ:ODFL).

What have hedge funds been doing with Old Dominion Freight Line, Inc. (NASDAQ:ODFL)?

At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ODFL over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Citadel Investment Group held the most valuable stake in Old Dominion Freight Line, Inc. (NASDAQ:ODFL), which was worth $58.1 million at the end of the third quarter. On the second spot was Luminus Management which amassed $51.4 million worth of shares. Echo Street Capital Management, AQR Capital Management, and Winton 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 Luminus Management allocated the biggest weight to Old Dominion Freight Line, Inc. (NASDAQ:ODFL), around 5.31% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, earmarking 1.85 percent of its 13F equity portfolio to ODFL.

Because Old Dominion Freight Line, Inc. (NASDAQ:ODFL) has witnessed declining sentiment from the aggregate hedge fund industry, it’s safe to say that there exists a select few funds that decided to sell off their entire stakes last quarter. Interestingly, Bo Shan’s Gobi Capital dropped the biggest position of the 750 funds tracked by Insider Monkey, valued at about $18.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $5.3 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Old Dominion Freight Line, Inc. (NASDAQ:ODFL) but similarly valued. We will take a look at Corning Incorporated (NYSE:GLW), Arista Networks Inc (NYSE:ANET), Arthur J. Gallagher & Co. (NYSE:AJG), and Stanley Black & Decker, Inc. (NYSE:SWK). This group of stocks’ market valuations resemble ODFL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GLW 30 106293 -5
ANET 24 470614 -2
AJG 28 373347 -3
SWK 36 907916 -5
Average 29.5 464543 -3.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $465 million. That figure was $348 million in ODFL’s case. Stanley Black & Decker, Inc. (NYSE:SWK) is the most popular stock in this table. On the other hand Arista Networks Inc (NYSE:ANET) is the least popular one with only 24 bullish hedge fund positions. Old Dominion Freight Line, Inc. (NASDAQ:ODFL) is not the most popular stock in this group but hedge fund interest is still above average. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on ODFL as the stock returned 30.3% in Q2 (through the end of May) 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.