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Is ON24, Inc. (ONTF) Going to Burn These Hedge Funds?

·6 min read

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 ON24, Inc. (NYSE:ONTF).

Is ON24, Inc. (NYSE:ONTF) the right investment to pursue these days? The smart money was buying. The number of bullish hedge fund bets rose by 19 in recent months. ON24, Inc. (NYSE:ONTF) was in 19 hedge funds' portfolios at the end of the first quarter of 2021. Our calculations also showed that ONTF isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Today there are tons of metrics investors employ to size up stocks. A pair of the best metrics are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the elite money managers can outclass the broader indices by a solid amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Stuart Zimmer Zimmer Partners
Stuart Zimmer Zimmer Partners

Stuart Zimmer of Zimmer Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Now we're going to take a look at the key hedge fund action regarding ON24, Inc. (NYSE:ONTF).

Do Hedge Funds Think ONTF Is A Good Stock To Buy Now?

At first quarter's end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19 from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in ONTF a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ONTF A Good Stock To Buy?
Is ONTF A Good Stock To Buy?

The largest stake in ON24, Inc. (NYSE:ONTF) was held by Tiger Global Management LLC, which reported holding $77.6 million worth of stock at the end of December. It was followed by Ophir Asset Management with a $15.9 million position. Other investors bullish on the company included Zimmer Partners, CaaS Capital, and Tudor Investment Corp. In terms of the portfolio weights assigned to each position Ophir Asset Management allocated the biggest weight to ON24, Inc. (NYSE:ONTF), around 3.21% of its 13F portfolio. Tiger Global Management LLC is also relatively very bullish on the stock, earmarking 0.18 percent of its 13F equity portfolio to ONTF.

As aggregate interest increased, specific money managers were leading the bulls' herd. Tiger Global Management LLC, managed by Chase Coleman, assembled the largest position in ON24, Inc. (NYSE:ONTF). Tiger Global Management LLC had $77.6 million invested in the company at the end of the quarter. Steven Ng and Andrew Mitchell's Ophir Asset Management also initiated a $15.9 million position during the quarter. The following funds were also among the new ONTF investors: Stuart J. Zimmer's Zimmer Partners, Frank Fu's CaaS Capital, and Paul Tudor Jones's Tudor Investment Corp.

Let's also examine hedge fund activity in other stocks similar to ON24, Inc. (NYSE:ONTF). These stocks are Piedmont Office Realty Trust, Inc. (NYSE:PDM), Vector Group Ltd (NYSE:VGR), Edgewell Personal Care Company (NYSE:EPC), Velodyne Lidar, Inc. (NASDAQ:VLDR), FinVolution Group (NYSE:FINV), Trustmark Corp (NASDAQ:TRMK), and Nano Dimension Ltd. (NASDAQ:NNDM). This group of stocks' market caps match ONTF's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PDM,13,81180,2 VGR,14,150484,0 EPC,20,235053,0 VLDR,15,43509,-1 FINV,11,14660,3 TRMK,7,16486,-6 NNDM,11,203146,5 Average,13,106360,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $106 million. That figure was $118 million in ONTF's case. Edgewell Personal Care Company (NYSE:EPC) is the most popular stock in this table. On the other hand Trustmark Corp (NASDAQ:TRMK) is the least popular one with only 7 bullish hedge fund positions. ON24, Inc. (NYSE:ONTF) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ONTF is 83.8. 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 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately ONTF wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ONTF were disappointed as the stock returned -27.3% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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