Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. This year hedge funds’ top 30 stock picks easily bested the broader market, at 6.7% compared to 2.6%, despite there being a few duds in there like Facebook (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.
Is Ooma Inc (NYSE:OOMA) a good investment right now? Money managers are in an optimistic mood. The number of long hedge fund bets inched up by 2 recently. Our calculations also showed that ooma isn’t among the 30 most popular stocks among hedge funds. OOMA was in 15 hedge funds’ portfolios at the end of the third quarter of 2018. There were 13 hedge funds in our database with OOMA positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to take a look at the recent hedge fund action encompassing Ooma Inc (NYSE:OOMA).
How have hedgies been trading Ooma Inc (NYSE:OOMA)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in OOMA over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ooma Inc (NYSE:OOMA) was held by Woodson Capital Management, which reported holding $22.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $18.4 million position. Other investors bullish on the company included Tiger Management, Headlands Capital, and Royce & Associates.
With a general bullishness amongst the heavyweights, some big names were breaking ground themselves. Portolan Capital Management, managed by George McCabe, assembled the most outsized position in Ooma Inc (NYSE:OOMA). Portolan Capital Management had $5.8 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.4 million investment in the stock during the quarter.
Let’s go over hedge fund activity in other stocks similar to Ooma Inc (NYSE:OOMA). These stocks are Seneca Foods Corp (NASDAQ:SENEA), Western Asset/Claymore Inflation-Linked Securities & Income Fund (NYSE:WIA), Clarus Corporation (NASDAQ:CLAR), and Eaton Vance National Municipal Opportunities Trust (NYSE:EOT). All of these stocks’ market caps match OOMA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SENEA | 4 | 16724 | 1 |
| WIA | 2 | 735 | 0 |
| CLAR | 10 | 52682 | 0 |
| EOT | 1 | 401 | 0 |
| Average | 4.25 | 17636 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 4.25 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $90 million in OOMA’s case. Clarus Corporation (NASDAQ:CLAR) is the most popular stock in this table. On the other hand Eaton Vance National Municipal Opportunities Trust (NYSE:EOT) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Ooma Inc (NYSE:OOMA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
