Hedge Funds Are Selling ON Semiconductor Corp (ON)

You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make a proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

ON Semiconductor Corp (NASDAQ:ON) was in 29 hedge funds’ portfolios at the end of the third quarter of 2015. ON Semiconductor Corp (NASDAQ:ON) has experienced a decrease in hedge fund interest recently. There were 40 hedge funds in our database with ON Semiconductor Corp (NASDAQ:ON) holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article, we will examine companies such as USG Corporation (NYSE:USG), Toro Company (NYSE:TTC), and Hospitality Properties Trust (NYSE:HPT) to gather more data points.

To the average investor, there are a lot of signals investors use to size up their stock investments. A duo of the most underrated signals are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can beat the market by a solid margin (see the details here).

Keeping this in mind, let’s take a gander at the fresh action encompassing ON Semiconductor Corp (NASDAQ:ON).

What does the smart money think about ON Semiconductor Corp (NASDAQ:ON)?

At the end of the third quarter, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 28% from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Greenlight Capital, managed by David Einhorn, holds the number one position in ON Semiconductor Corp (NASDAQ:ON). Greenlight Capital has a $162.7 million position in the stock, comprising 2.7% of its 13F portfolio. The second largest stake is held by Pzena Investment Management, managed by Richard S. Pzena, which holds a $103.3 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise James H. Litinsky’s JHL Capital Group, Zac Hirzel’s Hirzel Capital Management and Josh Resnick’s Jericho Capital Asset Management.

Seeing as ON Semiconductor Corp (NASDAQ:ON) has experienced a bearish sentiment from the smart money, logic holds that there were a few hedgies who were dropping their positions entirely in the third quarter. Intriguingly, Glenn Russell Dubin’s Highbridge Capital Management sold off the biggest investment of the “upper crust” of funds monitored by Insider Monkey, totaling close to $37.1 million in stock. Charles Clough’s fund, Clough Capital Partners, also cut its stock, about $19.6 million worth of shares. These transactions are interesting, as aggregate hedge fund interest fell by 11 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as ON Semiconductor Corp (NASDAQ:ON) but similarly valued. These stocks are USG Corporation (NYSE:USG), Toro Company (NYSE:TTC), Hospitality Properties Trust (NYSE:HPT), and Graco Inc. (NYSE:GGG). This group of stocks’ market values is closest to ON Semiconductor Corp (NASDAQ:ON)’s market value.

As you can see, these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $409 million. That figure was $564 million in ON Semiconductor Corp (NASDAQ:ON)’s case. USG Corporation (NYSE:USG) is the most popular stock in this table. On the other hand, Graco Inc. (NYSE:GGG) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks, ON Semiconductor Corp (NASDAQ:ON) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.