Were Hedge Funds Right About ON Semiconductor Corporation (ON)?

After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards ON Semiconductor Corporation (NASDAQ:ON).

ON Semiconductor Corporation (NASDAQ:ON) was in 44 hedge funds’ portfolios at the end of June. The all time high for this statistic is 45. ON investors should be aware of an increase in support from the world’s most elite money managers lately. There were 41 hedge funds in our database with ON positions at the end of the first quarter. Our calculations also showed that ON isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Smith of Starboard Value LP

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 are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s go over the key hedge fund action regarding ON Semiconductor Corporation (NASDAQ:ON).

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

Heading into the third quarter of 2021, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from the first quarter of 2020. By comparison, 32 hedge funds held shares or bullish call options in ON a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Jeffrey Smith’s Starboard Value LP has the largest position in ON Semiconductor Corporation (NASDAQ:ON), worth close to $332.6 million, comprising 6.5% of its total 13F portfolio. On Starboard Value LP’s heels is Renaissance Technologies, holding a $100.9 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish encompass Noam Gottesman’s GLG Partners, Robert Boucai’s Newbrook Capital Advisors and Frank Fu’s 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 6.53% of its 13F portfolio. Newbrook Capital Advisors is also relatively very bullish on the stock, setting aside 5.09 percent of its 13F equity portfolio to ON.

Now, specific money managers were breaking ground themselves. Deepcurrents Investment Group, managed by Steve Zheng, assembled the most valuable position in ON Semiconductor Corporation (NASDAQ:ON). Deepcurrents Investment Group had $6.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $5.4 million position during the quarter. The other funds with brand new ON positions are Ray Dalio’s Bridgewater Associates, Matthew Hulsizer’s PEAK6 Capital Management, and Andrew Sandler’s Sandler Capital Management.

Let’s now review hedge fund activity in other stocks similar to ON Semiconductor Corporation (NASDAQ:ON). We will take a look at Markel Corporation (NYSE:MKL), TAL Education Group (NYSE:TAL), WPP Plc (NYSE:WPP), PPD, Inc. (NASDAQ:PPD), Franklin Resources, Inc. (NYSE:BEN), Quest Diagnostics Incorporated (NYSE:DGX), and Eastman Chemical Company (NYSE:EMN). This group of stocks’ market values resemble ON’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $570 million. That figure was $1021 million in ON’s case. PPD, Inc. (NASDAQ:PPD) is the most popular stock in this table. On the other hand WPP Plc (NYSE:WPP) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks ON Semiconductor Corporation (NASDAQ:ON) is more popular among hedge funds. Our overall hedge fund sentiment score for ON is 87.3. 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. 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 returned 29.6% in 2021 through November 5th but still managed to beat the market by 3.1 percentage points. Hedge funds were also right about betting on ON as the stock returned 54.5% since the end of June (through 11/5) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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