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 OneSpan Inc. (NASDAQ:OSPN).
OneSpan Inc. (NASDAQ:OSPN) shareholders have witnessed a decrease in activity from the world’s largest hedge funds in recent months. Our calculations also showed that OSPN isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to check out the new hedge fund action surrounding OneSpan Inc. (NASDAQ:OSPN).
Hedge fund activity in OneSpan Inc. (NASDAQ:OSPN)
At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -23% from the first quarter of 2019. By comparison, 12 hedge funds held shares or bullish call options in OSPN a year ago. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, Legion Partners Asset Management held the most valuable stake in OneSpan Inc. (NASDAQ:OSPN), which was worth $34.2 million at the end of the second quarter. On the second spot was Ancora Advisors which amassed $14.8 million worth of shares. Moreover, Archon Capital Management, D E Shaw, and AQR Capital Management were also bullish on OneSpan Inc. (NASDAQ:OSPN), allocating a large percentage of their portfolios to this stock.
Since OneSpan Inc. (NASDAQ:OSPN) has experienced declining sentiment from hedge fund managers, logic holds that there is a sect of funds that decided to sell off their positions entirely heading into Q3. It’s worth mentioning that Phil Frohlich’s Prescott Group Capital Management cut the largest investment of all the hedgies tracked by Insider Monkey, worth an estimated $0.4 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund said goodbye to about $0.4 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 3 funds heading into Q3.
Let’s check out hedge fund activity in other stocks similar to OneSpan Inc. (NASDAQ:OSPN). These stocks are QCR Holdings, Inc. (NASDAQ:QCRH), Diamond S Shipping Inc. (NYSE:DSSI), Fossil Group Inc (NASDAQ:FOSL), and Magenta Therapeutics, Inc. (NASDAQ:MGTA). All of these stocks’ market caps match OSPN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| QCRH | 8 | 65558 | -2 |
| DSSI | 11 | 149769 | 4 |
| FOSL | 13 | 66559 | -4 |
| MGTA | 8 | 72421 | 0 |
| Average | 10 | 88577 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $89 million. That figure was $72 million in OSPN’s case. Fossil Group Inc (NASDAQ:FOSL) is the most popular stock in this table. On the other hand QCR Holdings, Inc. (NASDAQ:QCRH) is the least popular one with only 8 bullish hedge fund positions. OneSpan Inc. (NASDAQ:OSPN) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on OSPN, though not to the same extent, as the stock returned 2.3% during the third quarter and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
