The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Old Republic International Corporation (NYSE:ORI) and determine whether the smart money was really smart about this stock.
Old Republic International Corporation (NYSE:ORI) was in 26 hedge funds' portfolios at the end of June. The all time high for this statistics is 27. ORI investors should be aware of a decrease in hedge fund interest recently. There were 27 hedge funds in our database with ORI positions at the end of the first quarter. Our calculations also showed that ORI 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.
Martin Whitman of Third Avenue Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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 let's review the fresh hedge fund action encompassing Old Republic International Corporation (NYSE:ORI).
Hedge fund activity in Old Republic International Corporation (NYSE:ORI)
Heading into the third quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -4% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in ORI over the last 20 quarters. So, let's see 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 $54.3 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $44.4 million worth of shares. AQR Capital Management, Millennium Management, and Third Avenue Management 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 Third Avenue Management allocated the biggest weight to Old Republic International Corporation (NYSE:ORI), around 2.56% of its 13F portfolio. Prana Capital Management is also relatively very bullish on the stock, designating 1.3 percent of its 13F equity portfolio to ORI.
Judging by 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 funds who were dropping their positions entirely heading into Q3. At the top of the heap, David Harding's Winton Capital Management said goodbye to the biggest investment of the 750 funds followed by Insider Monkey, totaling close to $3.3 million in stock, and Paul Tudor Jones's Tudor Investment Corp was right behind this move, as the fund sold off about $0.6 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q3.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Old Republic International Corporation (NYSE:ORI) but similarly valued. We will take a look at Dada Nexus Limited (NASDAQ:DADA), Skechers USA Inc (NYSE:SKX), Invesco Ltd. (NYSE:IVZ), People's United Financial, Inc. (NASDAQ:PBCT), First Industrial Realty Trust, Inc. (NYSE:FR), Novavax, Inc. (NASDAQ:NVAX), and Oshkosh Corporation (NYSE:OSK). This group of stocks' market valuations are closest to ORI's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DADA,17,64230,17 SKX,33,624872,7 IVZ,22,161181,-4 PBCT,24,89424,2 FR,30,356250,6 NVAX,18,733714,14 OSK,27,206936,5 Average,24.4,319515,6.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.4 hedge funds with bullish positions and the average amount invested in these stocks was $320 million. That figure was $232 million in ORI's case. Skechers USA Inc (NYSE:SKX) is the most popular stock in this table. On the other hand Dada Nexus Limited (NASDAQ:DADA) is the least popular one with only 17 bullish hedge fund positions. Old Republic International Corporation (NYSE:ORI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ORI is 61. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately ORI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ORI were disappointed as the stock returned -11.6% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.