Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about ON Semiconductor Corporation (NASDAQ:ON) in this article.
Is ON Semiconductor Corporation (NASDAQ:ON) a bargain? Money managers were taking a bullish view. The number of bullish hedge fund bets rose by 3 in recent months. ON Semiconductor Corporation (NASDAQ:ON) was in 44 hedge funds’ portfolios at the end of June. The all time high for this statistic is 45. Our calculations also showed that ON isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 41 hedge funds in our database with ON positions at the end of the first quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
Noam Gottesman of GLG Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a glance at the new hedge fund action regarding ON Semiconductor Corporation (NASDAQ:ON).
Do Hedge Funds Think ON Is A Good Stock To Buy Now?
At second quarter’s end, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the previous quarter. By comparison, 32 hedge funds held shares or bullish call options in ON a year ago. With hedgies’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).
The largest stake in ON Semiconductor Corporation (NASDAQ:ON) was held by Starboard Value LP, which reported holding $332.6 million worth of stock at the end of June. It was followed by Renaissance Technologies with a $100.9 million position. Other investors bullish on the company included GLG Partners, Newbrook Capital Advisors, and CaaS Capital. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to ON Semiconductor Corporation (NASDAQ:ON), around 6.53% of its 13F portfolio. Newbrook Capital Advisors is also relatively very bullish on the stock, designating 5.09 percent of its 13F equity portfolio to ON.
As industrywide interest jumped, key money managers have jumped into ON Semiconductor Corporation (NASDAQ:ON) headfirst. Deepcurrents Investment Group, managed by Steve Zheng, initiated the most valuable position in ON Semiconductor Corporation (NASDAQ:ON). Deepcurrents Investment Group had $6.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $5.4 million position during the quarter. The following funds were also among the new ON investors: Ray Dalio’s Bridgewater Associates, Matthew Hulsizer’s PEAK6 Capital Management, and Andrew Sandler’s Sandler Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ON Semiconductor Corporation (NASDAQ:ON) but similarly valued. These stocks are Markel Corporation (NYSE:MKL), TAL Education Group (NYSE:TAL), WPP Plc (NASDAQ:WPP), PPD, Inc. (NASDAQ:PPD), Franklin Resources, Inc. (NYSE:BEN), Quest Diagnostics Incorporated (NYSE:DGX), and Eastman Chemical Company (NYSE:EMN). This group of stocks’ market caps are similar to ON’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MKL | 33 | 709075 | 3 |
| TAL | 27 | 606671 | -11 |
| WPP | 6 | 23931 | 1 |
| PPD | 37 | 1910889 | 8 |
| BEN | 30 | 205166 | -1 |
| DGX | 31 | 376501 | -3 |
| EMN | 27 | 156403 | 0 |
| Average | 27.3 | 569805 | -0.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $570 million. That figure was $1021 million in ON’s case. PPD, Inc. (NASDAQ:PPD) is the most popular stock in this table. On the other hand WPP Plc (NASDAQ:WPP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks ON Semiconductor Corporation (NASDAQ:ON) is more popular among hedge funds. Our overall hedge fund sentiment score for ON is 87.3. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 22.9% in 2021 through October 1st but still managed to beat the market by 5.6 percentage points. Hedge funds were also right about betting on ON as the stock returned 19.1% since the end of June (through 10/1) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Follow On Semiconductor Corp (NASDAQ:ON)
Follow On Semiconductor Corp (NASDAQ:ON)
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Disclosure: None. This article was originally published at Insider Monkey.
