Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Old Second Bancorp Inc. (NASDAQ:OSBC) changed recently.
Is Old Second Bancorp Inc. (NASDAQ:OSBC) a buy right now? Hedge funds are becoming more confident. The number of bullish hedge fund positions inched up by 3 in recent months. Our calculations also showed that osbc isn’t among the 30 most popular stocks among hedge funds. OSBC was in 11 hedge funds’ portfolios at the end of the third quarter of 2018. There were 8 hedge funds in our database with OSBC positions at the end of the previous quarter.
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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s review the latest hedge fund action regarding Old Second Bancorp Inc. (NASDAQ:OSBC).
Hedge fund activity in Old Second Bancorp Inc. (NASDAQ:OSBC)
At Q3’s end, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards OSBC over the last 13 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 $17.5 million worth of stock at the end of September. It was followed by Castine Capital Management with a $7 million position. Other investors bullish on the company included AlphaOne Capital Partners, Gillson Capital, and Elizabeth Park Capital Management.
Consequently, specific money managers have jumped into Old Second Bancorp Inc. (NASDAQ:OSBC) headfirst. Elizabeth Park Capital Management, managed by Fred Cummings, assembled the most valuable position in Old Second Bancorp Inc. (NASDAQ:OSBC). Elizabeth Park Capital Management had $1.7 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.4 million investment in the stock during the quarter. The only other fund with a new position in the stock is John Overdeck and David Siegel’s Two Sigma Advisors.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Old Second Bancorp Inc. (NASDAQ:OSBC) but similarly valued. We will take a look at SEACOR Marine Holdings Inc. (NYSE:SMHI), Forty Seven, Inc. (NASDAQ:FTSV), Limoneira Company (NASDAQ:LMNR), and TG Therapeutics Inc (NASDAQ:TGTX). This group of stocks’ market values are closest to OSBC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMHI | 6 | 50037 | -1 |
| FTSV | 7 | 21181 | -6 |
| LMNR | 6 | 19529 | 2 |
| TGTX | 19 | 113340 | 1 |
| Average | 9.5 | 51022 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $51 million. That figure was $34 million in OSBC’s case. TG Therapeutics Inc (NASDAQ:TGTX) is the most popular stock in this table. On the other hand SEACOR Marine Holdings Inc. (NYSE:SMHI) is the least popular one with only 6 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TGTX might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.