We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Old Republic International Corporation (NYSE:ORI).
Old Republic International Corporation (NYSE:ORI) has seen a decrease in support from the world’s most elite money managers recently. ORI was in 17 hedge funds’ portfolios at the end of September. There were 21 hedge funds in our database with ORI positions at the end of the previous quarter. Our calculations also showed that ORI 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.
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’ 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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 also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a look at the fresh hedge fund action surrounding Old Republic International Corporation (NYSE:ORI).
Hedge fund activity in Old Republic International Corporation (NYSE:ORI)
Heading into the fourth quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the second quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in ORI a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Old Republic International Corporation (NYSE:ORI), with a stake worth $140.9 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $124.2 million. AQR Capital Management, GLG Partners, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Interval Partners allocated the biggest weight to Old Republic International Corporation (NYSE:ORI), around 0.35% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, earmarking 0.33 percent of its 13F equity portfolio to ORI.
Since Old Republic International Corporation (NYSE:ORI) has faced declining sentiment from the smart money, it’s easy to see that there were a few hedgies that slashed their full holdings by the end of the third quarter. Intriguingly, Ron Bobman’s Capital Returns Management dropped the biggest investment of the “upper crust” of funds watched by Insider Monkey, worth about $3.9 million in stock, and Roger Ibbotson’s Zebra Capital Management was right behind this move, as the fund sold off about $0.3 million worth. These transactions are interesting, as total hedge fund interest was cut by 4 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks similar to Old Republic International Corporation (NYSE:ORI). We will take a look at Hubbell Incorporated (NYSE:HUBB), FLIR Systems, Inc. (NASDAQ:FLIR), Americold Realty Trust (NYSE:COLD), and Woori Financial Group Inc. (NYSE:WF). This group of stocks’ market values resemble ORI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HUBB | 23 | 383354 | 5 |
| FLIR | 22 | 269438 | 2 |
| COLD | 27 | 472297 | -3 |
| WF | 2 | 2420 | 1 |
| Average | 18.5 | 281877 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $282 million. That figure was $418 million in ORI’s case. Americold Realty Trust (NYSE:COLD) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 2 bullish hedge fund positions. Old Republic International Corporation (NYSE:ORI) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 ORI wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ORI investors were disappointed as the stock returned -4.3% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
