Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Old Republic International Corporation (NYSE:ORI) changed recently.
Old Republic International Corporation (NYSE:ORI) has seen an increase in support from the world’s most elite money managers recently. ORI was in 20 hedge funds’ portfolios at the end of the third quarter of 2018. There were 19 hedge funds in our database with ORI holdings at the end of the previous quarter. Our calculations also showed that ori isn’t among the 30 most popular stocks among hedge funds.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Let’s review the fresh hedge fund action surrounding Old Republic International Corporation (NYSE:ORI).
How have hedgies been trading Old Republic International Corporation (NYSE:ORI)?
At Q3’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from one quarter earlier. On the other hand, there were a total of 24 hedge funds with a bullish position in ORI at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Old Republic International Corporation (NYSE:ORI) was held by Renaissance Technologies, which reported holding $195 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $69.1 million position. Other investors bullish on the company included AQR Capital Management, Two Sigma Advisors, and Capital Returns Management.
As industrywide interest jumped, some big names were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, created the most outsized position in Old Republic International Corporation (NYSE:ORI). Balyasny Asset Management had $0.5 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser’s Magnetar Capital also initiated a $0.3 million position during the quarter. The other funds with new positions in the stock are Roger Ibbotson’s Zebra Capital Management and David Andre and Astro Teller’s Cerebellum Capital.
Let’s now take a look at hedge fund activity in other stocks similar to Old Republic International Corporation (NYSE:ORI). These stocks are Assurant, Inc. (NYSE:AIZ), James Hardie Industries plc (NYSE:JHX), Pool Corporation (NASDAQ:POOL), and Texas Pacific Land Trust (NYSE:TPL). This group of stocks’ market values match ORI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AIZ | 23 | 328481 | 9 |
| JHX | 2 | 4763 | 1 |
| POOL | 17 | 263814 | -2 |
| TPL | 11 | 1652556 | 1 |
| Average | 13.25 | 562404 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $562 million. That figure was $434 million in ORI’s case. Assurant, Inc. (NYSE:AIZ) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular one with only 2 bullish hedge fund positions. Old Republic International Corporation (NYSE:ORI) 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. In this regard AIZ might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
