As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the second quarter. We get to see hedge funds' thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Old Republic International Corporation (NYSE:ORI).
Old Republic International Corporation (NYSE:ORI) investors should pay attention to an increase in hedge fund interest in recent months. ORI was in 21 hedge funds' portfolios at the end of June. There were 19 hedge funds in our database with ORI positions at the end of the previous quarter. Our calculations also showed that ORI isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's view the fresh hedge fund action regarding Old Republic International Corporation (NYSE:ORI).
Hedge fund activity in Old Republic International Corporation (NYSE:ORI)
At Q2's end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards ORI over the last 16 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Old Republic International Corporation (NYSE:ORI), which was worth $171.5 million at the end of the second quarter. On the second spot was Citadel Investment Group which amassed $112.9 million worth of shares. Moreover, AQR Capital Management, GLG Partners, and Two Sigma Advisors were also bullish on Old Republic International Corporation (NYSE:ORI), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Bailard Inc, managed by Thomas Bailard, initiated the most outsized position in Old Republic International Corporation (NYSE:ORI). Bailard Inc had $0.4 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $0.1 million investment in the stock during the quarter. The following funds were also among the new ORI investors: David Andre and Astro Teller's Cerebellum Capital and Claes Fornell's CSat Investment Advisory.
Let's now review hedge fund activity in other stocks similar to Old Republic International Corporation (NYSE:ORI). We will take a look at BRF S.A. (NYSE:BRFS), Charles River Laboratories International Inc. (NYSE:CRL), Robert Half International Inc. (NYSE:RHI), and Hexcel Corporation (NYSE:HXL). All of these stocks' market caps are similar to ORI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BRFS,13,124053,3 CRL,29,1066583,5 RHI,26,618890,1 HXL,23,150565,-2 Average,22.75,490023,1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $490 million. That figure was $414 million in ORI's case. Charles River Laboratories International Inc. (NYSE:CRL) i the most popular stock in this table. On the other hand BRF S.A. (NYSE:BRFS) is the least popular one with only 13 bullish hedge fund positions. Old Republic International Corporation (NYSE:ORI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on ORI as the stock returned 10.9% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
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