Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Old Second Bancorp Inc. (NASDAQ:OSBC) from the perspective of those elite funds.
Old Second Bancorp Inc. (NASDAQ:OSBC) shareholders have witnessed a decrease in hedge fund interest of late. OSBC was in 9 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with OSBC positions at the end of the previous quarter. Our calculations also showed that OSBC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Jim Simons of Renaissance Technologies
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a gander at the key hedge fund action regarding Old Second Bancorp Inc. (NASDAQ:OSBC).
What have hedge funds been doing with Old Second Bancorp Inc. (NASDAQ:OSBC)?
At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in OSBC over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, holds the biggest position in Old Second Bancorp Inc. (NASDAQ:OSBC). Renaissance Technologies has a $14.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Paul Magidson, Jonathan Cohen. And Ostrom Enders of Castine Capital Management, with a $8.7 million position; 2.4% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism consist of Fred Cummings’s Elizabeth Park Capital Management, Ken Griffin’s Citadel Investment Group and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Elizabeth Park Capital Management allocated the biggest weight to Old Second Bancorp Inc. (NASDAQ:OSBC), around 2.85% of its 13F portfolio. Castine Capital Management is also relatively very bullish on the stock, designating 2.38 percent of its 13F equity portfolio to OSBC.
Due to the fact that Old Second Bancorp Inc. (NASDAQ:OSBC) has experienced a decline in interest from the smart money, logic holds that there was a specific group of fund managers that elected to cut their entire stakes last quarter. Intriguingly, Daniel Johnson’s Gillson Capital said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, comprising an estimated $2.1 million in stock. Noam Gottesman’s fund, GLG Partners, also sold off its stock, about $0.7 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Old Second Bancorp Inc. (NASDAQ:OSBC). We will take a look at Ciner Resources LP (NYSE:CINR), Cambridge Bancorp (NASDAQ:CATC), Dynex Capital Inc (NYSE:DX), and Carriage Services, Inc. (NYSE:CSV). This group of stocks’ market valuations are closest to OSBC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CINR | 1 | 5077 | 0 |
| CATC | 4 | 15228 | -1 |
| DX | 7 | 15250 | 1 |
| CSV | 9 | 42949 | 0 |
| Average | 5.25 | 19626 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $33 million in OSBC’s case. Carriage Services, Inc. (NYSE:CSV) is the most popular stock in this table. On the other hand Ciner Resources LP (NYSE:CINR) is the least popular one with only 1 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately OSBC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OSBC were disappointed as the stock returned 1.1% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
