Were Hedge Funds Right About Old Dominion Freight Line, Inc. (ODFL)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Old Dominion Freight Line, Inc. (NASDAQ:ODFL) and determine whether hedge funds skillfully traded this stock.

Old Dominion Freight Line, Inc. (NASDAQ:ODFL) was in 33 hedge funds’ portfolios at the end of March. ODFL has experienced a decrease in support from the world’s most elite money managers of late. There were 34 hedge funds in our database with ODFL positions at the end of the previous quarter. Our calculations also showed that ODFL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

According to most investors, hedge funds are seen as unimportant, outdated investment vehicles of years past. While there are more than 8000 funds with their doors open at present, Our researchers choose to focus on the upper echelon of this club, about 850 funds. Most estimates calculate that this group of people watch over the lion’s share of all hedge funds’ total asset base, and by keeping an eye on their highest performing investments, Insider Monkey has identified a few investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Jonathan Barrett of Luminus Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to go over the recent hedge fund action encompassing Old Dominion Freight Line, Inc. (NASDAQ:ODFL).

How are hedge funds trading Old Dominion Freight Line, Inc. (NASDAQ:ODFL)?

At Q1’s end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ODFL over the last 18 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Among these funds, Citadel Investment Group held the most valuable stake in Old Dominion Freight Line, Inc. (NASDAQ:ODFL), which was worth $58.1 million at the end of the third quarter. On the second spot was Luminus Management which amassed $51.4 million worth of shares. Echo Street Capital Management, AQR Capital Management, and Winton Capital Management 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 Luminus Management allocated the biggest weight to Old Dominion Freight Line, Inc. (NASDAQ:ODFL), around 5.31% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, designating 1.85 percent of its 13F equity portfolio to ODFL.

Judging by the fact that Old Dominion Freight Line, Inc. (NASDAQ:ODFL) has experienced a decline in interest from the aggregate hedge fund industry, logic holds that there were a few money managers that decided to sell off their entire stakes by the end of the first quarter. At the top of the heap, Bo Shan’s Gobi Capital sold off the biggest position of the 750 funds monitored by Insider Monkey, comprising about $18.4 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also dropped its stock, about $5.3 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Old Dominion Freight Line, Inc. (NASDAQ:ODFL) but similarly valued. These stocks are Corning Incorporated (NYSE:GLW), Arista Networks Inc (NYSE:ANET), Arthur J. Gallagher & Co. (NYSE:AJG), and Stanley Black & Decker, Inc. (NYSE:SWK). All of these stocks’ market caps are closest to ODFL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $465 million. That figure was $348 million in ODFL’s case. Stanley Black & Decker, Inc. (NYSE:SWK) is the most popular stock in this table. On the other hand Arista Networks Inc (NYSE:ANET) is the least popular one with only 24 bullish hedge fund positions. Old Dominion Freight Line, Inc. (NASDAQ:ODFL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on ODFL as the stock returned 29.3% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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