Is OneSpan Inc. (OSPN) A Good Stock To Buy?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding OneSpan Inc. (NASDAQ:OSPN).

OneSpan Inc. (NASDAQ:OSPN) was in 10 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 17. OSPN shareholders have witnessed a decrease in hedge fund sentiment of late. There were 15 hedge funds in our database with OSPN positions at the end of the first quarter. Our calculations also showed that OSPN isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

In the eyes of most investors, hedge funds are perceived as worthless, outdated financial vehicles of the past. While there are more than 8000 funds trading at present, We choose to focus on the masters of this club, approximately 850 funds. It is estimated that this group of investors orchestrate bulk of all hedge funds’ total capital, and by keeping an eye on their top investments, Insider Monkey has come up with a few investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

Fred DiSanto of Ancora Advisors

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. Now let’s go over the fresh hedge fund action surrounding OneSpan Inc. (NASDAQ:OSPN).

Do Hedge Funds Think OSPN Is A Good Stock To Buy Now?

At Q2’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -33% from one quarter earlier. On the other hand, there were a total of 15 hedge funds with a bullish position in OSPN a year ago. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes substantially (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 $71.1 million at the end of the second quarter. On the second spot was Ancora Advisors which amassed $26.9 million worth of shares. Hawk Ridge Management, Cannell Capital, and SQN Investors 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 Legion Partners Asset Management allocated the biggest weight to OneSpan Inc. (NASDAQ:OSPN), around 14.29% of its 13F portfolio. Cannell Capital is also relatively very bullish on the stock, setting aside 2.78 percent of its 13F equity portfolio to OSPN.

Judging by the fact that OneSpan Inc. (NASDAQ:OSPN) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there were a few hedgies who sold off their entire stakes last quarter. Intriguingly, Daniel Patrick Gibson’s Sylebra Capital Management dumped the largest investment of all the hedgies monitored by Insider Monkey, comprising about $16.2 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $1.1 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 5 funds last quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as OneSpan Inc. (NASDAQ:OSPN) but similarly valued. We will take a look at Endeavour Silver Corp. (NYSE:EXK), Forestar Group Inc. (NYSE:FOR), Humanigen, Inc. (NASDAQ:HGEN), NexTier Oilfield Solutions Inc. (NYSE:NEX), GreenSky, Inc. (NASDAQ:GSKY), UMH Properties, Inc (NYSE:UMH), and Tactile Systems Technology, Inc. (NASDAQ:TCMD). This group of stocks’ market valuations are similar to OSPN’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $96 million. That figure was $157 million in OSPN’s case. NexTier Oilfield Solutions Inc. (NYSE:NEX) is the most popular stock in this table. On the other hand Endeavour Silver Corp. (NYSE:EXK) 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 overall hedge fund sentiment score for OSPN is 23.9. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 25.7% in 2021 through September 27th and surpassed the market again by 6.2 percentage points. Unfortunately OSPN wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); OSPN investors were disappointed as the stock returned -27% since the end of June (through 9/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.