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Should You Avoid On Assignment, Inc. (ASGN)?

Concerns over a shift in Fed’s easy monetary policy have hit several hedge funds hard during the third quarter. A number of sectors are in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points between June 25, 2015 and October 30, 2015. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards On Assignment, Inc. (NYSE:ASGN).

Is On Assignment, Inc. (NYSE:ASGN) ready to rally soon? Hedge funds are becoming less confident. The number of long hedge fund positions went down by 4 in recent months. At the end of this article we will also compare ASGN to other stocks, including Demandware Inc (NYSE:DWRE), The Advisory Board Company (NASDAQ:ABCO), and SemGroup Corp (NYSE:SEMG) to get a better sense of its popularity.

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With all of this in mind, we’re going to take a gander at the key action surrounding On Assignment, Inc. (NYSE:ASGN).

What have hedge funds been doing with On Assignment, Inc. (NYSE:ASGN)?

At the Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Mariko Gordon’s Daruma Asset Management has the number one position in On Assignment, Inc. (NYSE:ASGN), worth close to $51.5 million, comprising 3.2% of its total 13F portfolio. Coming in second is Douglas Dossey and Arthur Young’s Tensile Capital, with a $30.7 million position; 9.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions consist of Ira Unschuld’s Brant Point Investment Management, Chuck Royce’s Royce & Associates and Steve Cohen’s Point72 Asset Management.

Judging by the fact that On Assignment, Inc. (NYSE:ASGN) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of money managers that elected to cut their positions entirely by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management cut the largest investment of the “upper crust” of funds followed by Insider Monkey, totaling close to $9.7 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund dumped about $3.2 million worth of shares. These transactions are interesting, as aggregate hedge fund interest was cut by 4 funds by the end of the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as On Assignment, Inc. (NYSE:ASGN) but similarly valued. These stocks are Demandware Inc (NYSE:DWRE), The Advisory Board Company (NASDAQ:ABCO), SemGroup Corp (NYSE:SEMG), and Patterson-UTI Energy, Inc. (NASDAQ:PTEN). This group of stocks’ market caps are closest to ASGN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DWRE 12 70061 -3
ABCO 11 172431 -4
SEMG 26 382539 3
PTEN 25 345564 -10

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $243 million. That figure was $143 million in ASGN’s case. SemGroup Corp (NYSE:SEMG) is the most popular stock in this table. On the other hand The Advisory Board Company (NASDAQ:ABCO) is the least popular one with only 11 bullish hedge fund positions. On Assignment, Inc. (NYSE:ASGN) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SEMG might be a better candidate to consider a long position.

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