Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
Is Old Republic International Corporation (NYSE:ORI) a buy, sell, or hold? Money managers are in a bearish mood. The number of long hedge fund positions were trimmed by 4 recently. Our calculations also showed that ori isn't among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to take a gander at the new hedge fund action surrounding Old Republic International Corporation (NYSE:ORI).
How have hedgies been trading Old Republic International Corporation (NYSE:ORI)?
Heading into the second quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ORI over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Old Republic International Corporation (NYSE:ORI), which was worth $191.4 million at the end of the first quarter. On the second spot was Citadel Investment Group which amassed $102.2 million worth of shares. Moreover, AQR Capital Management, Two Sigma Advisors, and GLG Partners were also bullish on Old Republic International Corporation (NYSE:ORI), allocating a large percentage of their portfolios to this stock.
Due to the fact that Old Republic International Corporation (NYSE:ORI) has witnessed falling interest from the smart money, it's safe to say that there exists a select few money managers that elected to cut their full holdings by the end of the third quarter. Intriguingly, Andrew Feldstein and Stephen Siderow's Blue Mountain Capital dropped the largest investment of all the hedgies followed by Insider Monkey, totaling an estimated $5.3 million in stock. Matthew Tewksbury's fund, Stevens Capital Management, also sold off its stock, about $1.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks similar to Old Republic International Corporation (NYSE:ORI). These stocks are Integrated Device Technology, Inc. (NASDAQ:IDTI), Aluminum Corp. of China Limited (NYSE:ACH), GrubHub Inc (NYSE:GRUB), and Ingredion Inc (NYSE:INGR). This group of stocks' market valuations are similar to ORI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position IDTI,29,1393513,-6 ACH,4,5548,0 GRUB,32,742868,9 INGR,18,295138,-3 Average,20.75,609267,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.75 hedge funds with bullish positions and the average amount invested in these stocks was $609 million. That figure was $432 million in ORI's case. GrubHub Inc (NYSE:GRUB) is the most popular stock in this table. On the other hand Aluminum Corp. of China Limited (NYSE:ACH) is the least popular one with only 4 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on ORI as the stock returned 6.2% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.