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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Old Dominion Freight Line, Inc. (NASDAQ:ODFL).
Is Old Dominion Freight Line, Inc. (NASDAQ:ODFL) a bargain? The smart money was becoming hopeful. The number of long hedge fund bets rose by 7 in recent months. Old Dominion Freight Line, Inc. (NASDAQ:ODFL) was in 47 hedge funds' portfolios at the end of June. The all time high for this statistic is 50. Our calculations also showed that ODFL isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 185.4% since March 2017 and outperformed the S&P 500 ETFs by more than 79 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Clint Carlson of Carlson Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence is one of the fastest-growing industries right now, so we are checking out stock pitches like this emerging AI 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. Keeping this in mind we're going to review the new hedge fund action encompassing Old Dominion Freight Line, Inc. (NASDAQ:ODFL).
Do Hedge Funds Think ODFL Is A Good Stock To Buy Now?
At the end of June, a total of 47 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. By comparison, 35 hedge funds held shares or bullish call options in ODFL a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Old Dominion Freight Line, Inc. (NASDAQ:ODFL), with a stake worth $234.1 million reported as of the end of June. Trailing AQR Capital Management was Echo Street Capital Management, which amassed a stake valued at $121.5 million. Citadel Investment Group, Osterweis Capital Management, and Bridgewater Associates 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 Aubrey Capital Management allocated the biggest weight to Old Dominion Freight Line, Inc. (NASDAQ:ODFL), around 1.78% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, designating 1.73 percent of its 13F equity portfolio to ODFL.
Now, key hedge funds have jumped into Old Dominion Freight Line, Inc. (NASDAQ:ODFL) headfirst. Shellback Capital, managed by Doug Gordon, Jon Hilsabeck and Don Jabro, created the most outsized position in Old Dominion Freight Line, Inc. (NASDAQ:ODFL). Shellback Capital had $15.2 million invested in the company at the end of the quarter. John Brennan's Sirios Capital Management also made a $12.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Michael Gelband's ExodusPoint Capital, Clint Carlson's Carlson Capital, and Benjamin A. Smith's Laurion Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Old Dominion Freight Line, Inc. (NASDAQ:ODFL) but similarly valued. We will take a look at ViacomCBS Inc. (NASDAQ:VIAC), Occidental Petroleum Corporation (NYSE:OXY), Equifax Inc. (NYSE:EFX), AvalonBay Communities Inc (NYSE:AVB), Arthur J. Gallagher & Co. (NYSE:AJG), Ameriprise Financial, Inc. (NYSE:AMP), and EPAM Systems Inc (NYSE:EPAM). All of these stocks' market caps are closest to ODFL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VIAC,71,1872050,-18 OXY,57,3620384,5 EFX,37,3075021,0 AVB,26,428148,-14 AJG,40,501380,16 AMP,37,1192124,0 EPAM,33,522910,9 Average,43,1601717,-0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 43 hedge funds with bullish positions and the average amount invested in these stocks was $1602 million. That figure was $673 million in ODFL's case. ViacomCBS Inc. (NASDAQ:VIAC) is the most popular stock in this table. On the other hand AvalonBay Communities Inc (NYSE:AVB) is the least popular one with only 26 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 overall hedge fund sentiment score for ODFL is 61.5. 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 gained 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on ODFL as the stock returned 12.6% since the end of Q2 (through 10/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.