We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (read our latest 10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of Old Dominion Freight Line (NASDAQ:ODFL) based on that data.
Is Old Dominion Freight Line (NASDAQ:ODFL) a buy here? The best stock pickers are taking a bullish view. The number of bullish hedge fund bets increased by 10 in recent months. Our calculations also showed that ODFL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). ODFL was in 34 hedge funds’ portfolios at the end of December. There were 24 hedge funds in our database with ODFL holdings 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ken Griffin of Citadel Investment Group
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the key hedge fund action surrounding Old Dominion Freight Line (NASDAQ:ODFL).
How have hedgies been trading Old Dominion Freight Line (NASDAQ:ODFL)?
At the end of the fourth quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 42% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ODFL over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Citadel Investment Group, managed by Ken Griffin, holds the most valuable position in Old Dominion Freight Line (NASDAQ:ODFL). Citadel Investment Group has a $89 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second largest stake is held by Cliff Asness of AQR Capital Management, with a $25.3 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions consist of Brandon Haley’s Holocene Advisors, Greg Poole’s Echo Street Capital Management and John Osterweis’s Osterweis Capital Management. In terms of the portfolio weights assigned to each position Gobi Capital allocated the biggest weight to Old Dominion Freight Line (NASDAQ:ODFL), around 2.64% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, earmarking 1.32 percent of its 13F equity portfolio to ODFL.
As one would reasonably expect, key hedge funds were leading the bulls’ herd. Holocene Advisors, managed by Brandon Haley, created the largest position in Old Dominion Freight Line (NASDAQ:ODFL). Holocene Advisors had $23.5 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also initiated a $14.1 million position during the quarter. The other funds with brand new ODFL positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, David Harding’s Winton Capital Management, and Ray Dalio’s Bridgewater Associates.
Let’s also examine hedge fund activity in other stocks similar to Old Dominion Freight Line (NASDAQ:ODFL). We will take a look at Burlington Stores Inc (NYSE:BURL), Waters Corporation (NYSE:WAT), Mid America Apartment Communities Inc (NYSE:MAA), and Westinghouse Air Brake Technologies Corp (NYSE:WAB). This group of stocks’ market valuations are closest to ODFL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BURL | 36 | 1375271 | -3 |
| WAT | 27 | 568485 | -1 |
| MAA | 24 | 234313 | 4 |
| WAB | 41 | 2013819 | 5 |
| Average | 32 | 1047972 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $1048 million. That figure was $322 million in ODFL’s case. Westinghouse Air Brake Technologies Corp (NYSE:WAB) is the most popular stock in this table. On the other hand Mid America Apartment Communities Inc (NYSE:MAA) is the least popular one with only 24 bullish hedge fund positions. Old Dominion Freight Line (NASDAQ:ODFL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but still beat the market by 3.2 percentage points. Hedge funds were also right about betting on ODFL as the stock returned -15.1% during the first quarter (through March 16th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
