Were Hedge Funds Illusioned With ON Semiconductor Corporation (ON)?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value 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 Semiconductor Corporation (NASDAQ:ON) at the end of the third quarter and determine whether the smart money was really smart about this stock.

ON Semiconductor Corporation (NASDAQ:ON) shareholders have witnessed a decrease in support from the world’s most elite money managers lately. ON Semiconductor Corporation (NASDAQ:ON) was in 41 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 45. There were 44 hedge funds in our database with ON positions at the end of the second quarter. Our calculations also showed that ON 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. Now we’re going to take a peek at the new hedge fund action regarding ON Semiconductor Corporation (NASDAQ:ON).

Jeffrey Smith of Starboard Value LP

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

Heading into the fourth quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. By comparison, 29 hedge funds held shares or bullish call options in ON a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

The largest stake in ON Semiconductor Corporation (NASDAQ:ON) was held by Starboard Value LP, which reported holding $381.6 million worth of stock at the end of September. It was followed by Crake Asset Management with a $110.4 million position. Other investors bullish on the company included Renaissance Technologies, GLG Partners, and CaaS Capital. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to ON Semiconductor Corporation (NASDAQ:ON), around 6.98% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, setting aside 6.86 percent of its 13F equity portfolio to ON.

Due to the fact that ON Semiconductor Corporation (NASDAQ:ON) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there is a sect of hedgies that decided to sell off their positions entirely in the third quarter. It’s worth mentioning that Robert Boucai’s Newbrook Capital Advisors said goodbye to the biggest position of the “upper crust” of funds tracked by Insider Monkey, worth close to $75.5 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $39 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds in the third quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ON Semiconductor Corporation (NASDAQ:ON) but similarly valued. These stocks are Cheniere Energy Partners LP (NYSE:CQP), Ulta Beauty, Inc. (NASDAQ:ULTA), Trip.com Group Limited (NASDAQ:TCOM), Insulet Corporation (NASDAQ:PODD), AMC Entertainment Holdings Inc (NYSE:AMC), DraftKings Inc. (NASDAQ:DKNG), and FirstEnergy Corp. (NYSE:FE). This group of stocks’ market caps are similar to ON’s market cap.

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As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1017 million. That figure was $1252 million in ON’s case. Ulta Beauty, Inc. (NASDAQ:ULTA) is the most popular stock in this table. On the other hand Cheniere Energy Partners LP (NYSE:CQP) is the least popular one with only 3 bullish hedge fund positions. ON Semiconductor Corporation (NASDAQ:ON) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ON is 78.1. 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. 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 still beat the market by 3.6 percentage points. Hedge funds were also right about betting on ON as the stock returned 28.9% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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