There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Jeff Ubben, George Soros and Carl Icahn think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze OMNOVA Solutions Inc. (NYSE:OMN).
OMNOVA Solutions Inc. (NYSE:OMN) shareholders have witnessed an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that OMN isn’t among the 30 most popular stocks among hedge funds.
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 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s take a look at the recent hedge fund action encompassing OMNOVA Solutions Inc. (NYSE:OMN).
What have hedge funds been doing with OMNOVA Solutions Inc. (NYSE:OMN)?
At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in OMN a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in OMNOVA Solutions Inc. (NYSE:OMN) was held by Renaissance Technologies, which reported holding $13.9 million worth of stock at the end of March. It was followed by GAMCO Investors with a $7.9 million position. Other investors bullish on the company included Barington Capital Group, Scopus Asset Management, and D E Shaw.
Now, some big names have jumped into OMNOVA Solutions Inc. (NYSE:OMN) headfirst. Scopus Asset Management, managed by Alexander Mitchell, assembled the most valuable position in OMNOVA Solutions Inc. (NYSE:OMN). Scopus Asset Management had $6.7 million invested in the company at the end of the quarter. Keith M. Rosenbloom’s Cruiser Capital Advisors also initiated a $1 million position during the quarter. The other funds with new positions in the stock are David Harding’s Winton Capital Management and Frederick DiSanto’s Ancora Advisors.
Let’s now review hedge fund activity in other stocks similar to OMNOVA Solutions Inc. (NYSE:OMN). These stocks are Home Bancorp, Inc. (NASDAQ:HBCP), Xinyuan Real Estate Co., Ltd. (NYSE:XIN), Avid Technology, Inc. (NASDAQ:AVID), and Cellular Biomedicine Group, Inc. (NASDAQ:CBMG). All of these stocks’ market caps resemble OMN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HBCP | 3 | 7928 | 1 |
| XIN | 7 | 5256 | -1 |
| AVID | 15 | 68733 | 3 |
| CBMG | 2 | 12174 | 2 |
| Average | 6.75 | 23523 | 1.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.75 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $52 million in OMN’s case. Avid Technology, Inc. (NASDAQ:AVID) is the most popular stock in this table. On the other hand Cellular Biomedicine Group, Inc. (NASDAQ:CBMG) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks OMNOVA Solutions Inc. (NYSE:OMN) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately OMN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OMN were disappointed as the stock returned -18.9% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
