Were These Hedge Funds Right About Betting On Old Dominion Freight Line (ODFL)?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Old Dominion Freight Line (NASDAQ:ODFL).

Old Dominion Freight Line (NASDAQ:ODFL) has experienced an increase in activity from the world’s largest hedge funds recently. Old Dominion Freight Line (NASDAQ:ODFL) was in 35 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 33 hedge funds in our database with ODFL holdings at the end of March. Our calculations also showed that ODFL isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 58 percentage points since March 2017 (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.

David Harding of Winton Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we’re going to analyze the recent hedge fund action surrounding Old Dominion Freight Line (NASDAQ:ODFL).

What have hedge funds been doing with Old Dominion Freight Line (NASDAQ:ODFL)?

At the end of June, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from one quarter earlier. By comparison, 23 hedge funds held shares or bullish call options in ODFL a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, AQR Capital Management, managed by Cliff Asness, holds the most valuable position in Old Dominion Freight Line (NASDAQ:ODFL). AQR Capital Management has a $85.1 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by Marshall Wace LLP, led by Paul Marshall and Ian Wace, holding a $70.9 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish contain Jonathan Barrett and Paul Segal’s Luminus Management, Greg Poole’s Echo Street Capital Management and David Harding’s Winton Capital Management. In terms of the portfolio weights assigned to each position Luminus Management allocated the biggest weight to Old Dominion Freight Line (NASDAQ:ODFL), around 6.67% of its 13F portfolio. Shellback Capital is also relatively very bullish on the stock, setting aside 2.68 percent of its 13F equity portfolio to ODFL.

With a general bullishness amongst the heavyweights, key money managers have jumped into Old Dominion Freight Line (NASDAQ:ODFL) headfirst. Renaissance Technologies, assembled the largest position in Old Dominion Freight Line (NASDAQ:ODFL). Renaissance Technologies had $28.7 million invested in the company at the end of the quarter. Seth Cogswell’s Running Oak Capital also initiated a $4.6 million position during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Jeffrey Talpins’s Element Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Old Dominion Freight Line (NASDAQ:ODFL). We will take a look at ZoomInfo Technologies Inc. (NASDAQ:ZI), PPL Corporation (NYSE:PPL), Edison International (NYSE:EIX), Wheaton Precious Metals Corp. (NYSE:WPM), Corning Incorporated (NYSE:GLW), TD Ameritrade Holding Corp. (NYSE:AMTD), and Deutsche Bank AG (NYSE:DB). This group of stocks’ market values are similar to ODFL’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $763 million. That figure was $480 million in ODFL’s case. TD Ameritrade Holding Corp. (NYSE:AMTD) is the most popular stock in this table. On the other hand Deutsche Bank AG (NYSE:DB) is the least popular one with only 11 bullish hedge fund positions. Old Dominion Freight Line (NASDAQ:ODFL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ODFL is 70.3. 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 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 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Hedge funds were also right about betting on ODFL as the stock returned 12.3% since the end of Q2 (through 10/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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