The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Omeros Corporation (NASDAQ:OMER), and what that likely means for the prospects of the company and its stock.
Omeros Corporation has experienced a decrease in hedge fund sentiment recently. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as First Financial Corp (NASDAQ:THFF), FairPoint Communications Inc (NASDAQ:FRP), and Koppers Holdings Inc. (NYSE:KOP) to gather more data points.
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In the financial world, there are numerous gauges stock market investors can use to appraise their stock investments. A pair of the most innovative gauges are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the top hedge fund managers can outpace the S&P 500 by a very impressive amount (see the details here).
Keeping this in mind, let’s go over the new action surrounding Omeros Corporation (NASDAQ:OMER).
What have hedge funds been doing with Omeros Corporation (NASDAQ:OMER)?
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the second quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cormorant Asset Management, managed by Bihua Chen, holds the biggest position in Omeros Corporation (NASDAQ:OMER). Cormorant Asset Management has a $21.5 million position in the stock, comprising 3.4% of its 13F portfolio. The second most bullish fund manager is Israel Englander of Millennium Management, with a $16.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism consist of Ken Griffin’s Citadel Investment Group, Julian Baker and Felix Baker’s Baker Bros. Advisors and D. E. Shaw’s D E Shaw.
Because Omeros Corporation (NASDAQ:OMER) has faced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of funds who sold off their positions entirely last quarter. Intriguingly, Peter Kolchinsky’s RA Capital Management dumped the largest stake of the “upper crust” of funds monitored by Insider Monkey, worth close to $13.5 million in call options., and Matthew Hulsizer’s PEAK6 Capital Management was right behind this move, as the fund dumped about $0.5 million worth of shares. These transactions are important to note, as total hedge fund interest dropped by 2 funds last quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Omeros Corporation (NASDAQ:OMER). These stocks are First Financial Corp (NASDAQ:THFF), FairPoint Communications Inc (NASDAQ:FRP), Koppers Holdings Inc. (NYSE:KOP), and El Pollo LoCo Holdings Inc (NASDAQ:LOCO). All of these stocks’ market caps are similar to OMER’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| THFF | 7 | 11841 | 3 |
| FRP | 21 | 186386 | 3 |
| KOP | 19 | 60200 | 3 |
| LOCO | 9 | 14469 | 2 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $68 million, up from $54 million in OMER’s case. FairPoint Communications Inc (NASDAQ:FRP) is the most popular stock in this table. On the other hand First Financial Corp (NASDAQ:THFF) is the least popular one with only 7 bullish hedge fund positions. Omeros Corporation (NASDAQ:OMER) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FRP might be a better candidate to consider a long position.
