We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Ooma Inc (NYSE:OOMA).
Ooma Inc (NYSE:OOMA) investors should be pay attention to the interest in their stock among top investors. In Ooma’s case, it was held in the portfolios of 8 investors tracked by Insider Monkey, as of September 30. Those investors held $12.65 million worth of its shares, or 10.90% of the float. Ooma, which went public in the middle of July, has not enjoyed much success in the hands of traders, as its shares are already down by 35% since its IPO. at the end of this article we will examine companies such as Novatel Wireless Inc (NASDAQ:MIFI), Marin Software Inc (NYSE:MRIN), and Morgans Hotel Group Co. (NASDAQ:MHGC) to see how popular Ooma was compared to similarly-sized companies.
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In the 21st century investor’s toolkit there are dozens of indicators shareholders employ to assess stocks. Two of the most innovative indicators are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can trounce the S&P 500 by a significant amount (see the details here).
Now, let’s check out the latest action surrounding Ooma Inc (NYSE:OOMA).
How have hedgies been trading Ooma Inc (NYSE:OOMA)?
At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in the newly-listed company’s stock. When looking at the institutional investors followed by Insider Monkey, Park West Asset Management, managed by Peter S. Park, holds the largest position in Ooma Inc (NYSE:OOMA). Park West Asset Management has a $4 million position in the stock, comprising 0.4% of its 13F portfolio. Sitting in the 2 spot is Citadel Investment Group, managed by Ken Griffin, which holds a $2.8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish include David Costen Haley’s HBK Investments, Eric Semler’s TCS Capital Management, and Anand Parekh’s Alyeska Investment Group.
Let’s check out hedge fund activity in other stocks similar to Ooma Inc (NYSE:OOMA). We will take a look at Novatel Wireless Inc (NASDAQ:MIFI), Marin Software Inc (NYSE:MRIN), Morgans Hotel Group Co. (NASDAQ:MHGC), and Roundy’s Inc (NYSE:RNDY). All of these stocks’ market caps resemble OOMA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MIFI | 8 | 8765 | -1 |
| MRIN | 7 | 8711 | 1 |
| MHGC | 18 | 29484 | -2 |
| RNDY | 6 | 4757 | -5 |
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 $13 million. That figure was also $13 million in OOMA’s case. Morgans Hotel Group Co. (NASDAQ:MHGC) is the most popular stock in this table. On the other hand Roundy’s Inc (NYSE:RNDY) is the least popular one with only 6 bullish hedge fund positions. Ooma Inc (NYSE:OOMA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MHGC might be a better candidate to consider a long position in.