Omega Protein Corporation (OME): Are Hedge Funds Right About This Stock?

Out of thousands of stocks that are currently traded on the market, it is difficult to determine those that can really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of over 700 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Omega Protein Corporation (NYSE:OME).

Omega Protein Corporation (NYSE:OME) has experienced an increase in hedge fund sentiment recently. OME was in 11 hedge funds’ portfolios at the end of September. There were 7 hedge funds in our database with OME positions at the end of the previous 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 THL Credit, Inc. (NASDAQ:TCRD), Corindus Vascular Robotics Inc (NYSEMKT:CVRS), and Weight Watchers International, Inc. (NYSE:WTW) to gather more data points.

To the average investor there are several tools stock market investors put to use to grade stocks. Some of the most under-the-radar tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the top picks of the top fund managers can outperform the S&P 500 by a healthy margin (see the details here).

With all of this in mind, let’s take a peek at the recent action regarding Omega Protein Corporation (NYSE:OME).

Hedge fund activity in Omega Protein Corporation (NYSE:OME)

Heading into Q4, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 57% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Nelson Obus’ Wynnefield Capital has the number one position in Omega Protein Corporation (NYSE:OME), worth close to $28.6 million, comprising 11.5% of its total 13F portfolio. On Wynnefield Capital’s heels is D E Shaw, which holds an $6.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism consist of Cliff Asness’s AQR Capital Management and Jim Simons’s Renaissance Technologies.

As one would reasonably expect, specific money managers were breaking ground themselves. Hawk Ridge Management, managed by David Brown, assembled the most outsized position in Omega Protein Corporation (NYSE:OME). Hawk Ridge Management had $2.1 million invested in the company at the end of the quarter. Chao Ku’s Nine Chapters Capital Management also made an $1.1 million investment in the stock during the quarter. The other funds with brand new OME positions are Ken Gray and Steve Walsh’s Bryn Mawr Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Omega Protein Corporation (NYSE:OME) but similarly valued. These stocks are THL Credit, Inc. (NASDAQ:TCRD), Corindus Vascular Robotics Inc (NYSEMKT:CVRS), Weight Watchers International, Inc. (NYSE:WTW), and Fifth Street Asset Management Inc (NASDAQ:FSAM). This group of stocks’ market caps resemble OME’s market cap.

As you can see these stocks had an average of eight hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $46 million in OME’s case. Weight Watchers International, Inc. (NYSE:WTW) is the most popular stock in this table. On the other hand Corindus Vascular Robotics Inc (NYSEMKT:CVRS) is the least popular one with only 4 bullish hedge fund positions. Omega Protein Corporation (NYSE:OME) 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 WTW might be a better candidate to consider a long position.