Was The Smart Money Right About On Holding AG (ONON)?

Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards On Holding AG (NYSE:ONON) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is On Holding AG (NYSE:ONON) a buy, sell, or hold? Hedge funds were getting more optimistic. The number of bullish hedge fund bets moved up by 30 lately. On Holding AG (NYSE:ONON) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that ONON isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind let’s take a glance at the new hedge fund action encompassing On Holding AG (NYSE:ONON).

Glen Kacher of Light Street Capital

Do Hedge Funds Think ONON Is A Good Stock To Buy Now?

At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 30 from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ONON over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Hillhouse Capital Management, managed by Lei Zhang, holds the biggest position in On Holding AG (NYSE:ONON). Hillhouse Capital Management has a $481.3 million position in the stock, comprising 6.3% of its 13F portfolio. On Hillhouse Capital Management’s heels is Luxor Capital Group, led by Christian Leone, holding a $183.9 million position; the fund has 1.6% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Glen Kacher’s Light Street Capital, Ken Griffin’s Citadel Investment Group and Robert Pohly’s Samlyn Capital. In terms of the portfolio weights assigned to each position Hillhouse Capital Management allocated the biggest weight to On Holding AG (NYSE:ONON), around 6.29% of its 13F portfolio. Luxor Capital Group is also relatively very bullish on the stock, setting aside 1.65 percent of its 13F equity portfolio to ONON.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Hillhouse Capital Management, managed by Lei Zhang, established the largest position in On Holding AG (NYSE:ONON). Hillhouse Capital Management had $481.3 million invested in the company at the end of the quarter. Christian Leone’s Luxor Capital Group also made a $183.9 million investment in the stock during the quarter. The following funds were also among the new ONON investors: Glen Kacher’s Light Street Capital, Ken Griffin’s Citadel Investment Group, and Robert Pohly’s Samlyn Capital.

Let’s now review hedge fund activity in other stocks similar to On Holding AG (NYSE:ONON). We will take a look at RPM International Inc. (NYSE:RPM), Molson Coors Beverage Company (NYSE:TAP), Grifols SA (NASDAQ:GRFS), Zions Bancorporation, National Association (NASDAQ:ZION), Everest Re Group Ltd (NYSE:RE), NRG Energy Inc (NYSE:NRG), and Bausch Health Companies Inc. (NYSE:BHC). This group of stocks’ market caps are closest to ONON’s market cap.

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As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $1004 million. That figure was $833 million in ONON’s case. Bausch Health Companies Inc. (NYSE:BHC) is the most popular stock in this table. On the other hand Grifols SA (NASDAQ:GRFS) is the least popular one with only 12 bullish hedge fund positions. On Holding AG (NYSE:ONON) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ONON is 63.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, ONON wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ONON were disappointed as the stock returned -12.5% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.