The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards OMNOVA Solutions Inc. (NYSE:OMN).
During the third quarter, OMNOVA Solutions saw an increase in enthusiasm from smart money, as the number of investors tracked by Insider Monkey long the stock went up to 17 from 10 during the the third quarter. 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 Potbelly Corp (NASDAQ:PBPB), NewLink Genetics Corp (NASDAQ:NLNK), and Versartic Inc (NASDAQ:VSAR) to gather more data points.
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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, let’s view the latest action surrounding OMNOVA Solutions Inc. (NYSE:OMN).
How are hedge funds trading OMNOVA Solutions Inc. (NYSE:OMN)?
At the end of the third quarter, 17 funds tracked by Insider Monkey held long positions in OMNOVA Solutions Inc. (NYSE:OMN), up by 70% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OMN over the last five quarters. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, GAMCO Investors, led by Mario Gabelli, holds the largest position in OMNOVA Solutions Inc. (NYSE:OMN). GAMCO Investors has a $10 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is James A. Mitarotonda of Barington Capital Group, with a $8.5 million position; 7% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish comprise Jim Simons’ Renaissance Technologies and Benjamin A. Smith’s Laurion Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
As aggregate interest increased, specific money managers were breaking ground themselves. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital initiated the most outsized position in OMNOVA Solutions Inc. (NYSE:OMN). Arrowstreet Capital had $2.6 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, Joshua Packwood and Schuster Tanger’s Radix Partners, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as OMNOVA Solutions Inc. (NYSE:OMN) but similarly valued. We will take a look at Potbelly Corp (NASDAQ:PBPB), NewLink Genetics Corp (NASDAQ:NLNK), Versartic Inc (NASDAQ:VSAR), and Casella Waste Systems Inc. (NASDAQ:CWST). This group of stocks’ market valuations match OMN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PBPB | 14 | 35210 | -2 |
| NLNK | 12 | 52368 | -1 |
| VSAR | 15 | 123488 | 9 |
| CWST | 18 | 101181 | 3 |
As you can see these stocks had an average of 15 investors with long positions and the average amount invested in these stocks was $78 million. That figure was $43 million in OMN’s case. Casella Waste Systems Inc. (NASDAQ:CWST) is the most popular stock in this table, while NewLink Genetics Corp (NASDAQ:NLNK) is the least popular one with only 12 bullish hedge fund positions. OMNOVA Solutions Inc. (NYSE:OMN) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Casella Waste Systems Inc. (NASDAQ:CWST) might be a better candidate to consider taking a long position in.
