In this article we are going to use hedge fund sentiment as a tool and determine whether Omnicom Group Inc. (NYSE:OMC) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is OMC a good stock to buy? Omnicom Group Inc. (NYSE:OMC) investors should pay attention to a decrease in enthusiasm from smart money in recent months. Omnicom Group Inc. (NYSE:OMC) was in 33 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 34. There were 34 hedge funds in our database with OMC positions at the end of the fourth quarter. Our calculations also showed that OMC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Peter Algert of Algert Global
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Keeping this in mind we’re going to take a look at the new hedge fund action surrounding Omnicom Group Inc. (NYSE:OMC).
Do Hedge Funds Think OMC Is A Good Stock To Buy Now?
At the end of March, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OMC over the last 23 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, D E Shaw was the largest shareholder of Omnicom Group Inc. (NYSE:OMC), with a stake worth $112.8 million reported as of the end of March. Trailing D E Shaw was AQR Capital Management, which amassed a stake valued at $88.3 million. Renaissance Technologies, Citadel Investment Group, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Ariel Investments allocated the biggest weight to Omnicom Group Inc. (NYSE:OMC), around 0.44% of its 13F portfolio. Algert Global is also relatively very bullish on the stock, designating 0.39 percent of its 13F equity portfolio to OMC.
Seeing as Omnicom Group Inc. (NYSE:OMC) has witnessed falling interest from the smart money, it’s safe to say that there were a few hedge funds that elected to cut their positions entirely by the end of the first quarter. Intriguingly, Michael Rockefeller and KarláKroeker’s Woodline Partners said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, totaling an estimated $16.2 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund dropped about $14.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 1 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Omnicom Group Inc. (NYSE:OMC) but similarly valued. We will take a look at IDEX Corporation (NYSE:IEX), Pembina Pipeline Corp (NYSE:PBA), Boston Properties, Inc. (NYSE:BXP), Brookfield Infrastructure Partners L.P. (NYSE:BIP), Wix.Com Ltd (NASDAQ:WIX), Markel Corporation (NYSE:MKL), and Check Point Software Technologies Ltd. (NASDAQ:CHKP). This group of stocks’ market valuations are closest to OMC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IEX | 19 | 843312 | -10 |
| PBA | 15 | 74858 | 2 |
| BXP | 27 | 1058389 | -3 |
| BIP | 12 | 47729 | -2 |
| WIX | 40 | 1461252 | 3 |
| MKL | 30 | 654208 | -6 |
| CHKP | 31 | 494577 | 5 |
| Average | 24.9 | 662046 | -1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.9 hedge funds with bullish positions and the average amount invested in these stocks was $662 million. That figure was $471 million in OMC’s case. Wix.Com Ltd (NASDAQ:WIX) is the most popular stock in this table. On the other hand Brookfield Infrastructure Partners L.P. (NYSE:BIP) is the least popular one with only 12 bullish hedge fund positions. Omnicom Group Inc. (NYSE:OMC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OMC is 70.6. 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. 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 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Hedge funds were also right about betting on OMC, though not to the same extent, as the stock returned 10% since Q1 (through July 2nd) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.
