Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. These stocks have been on a tear since the end of June, outperforming large-cap index funds by more than 10 percentage points. That’s why we pay special attention to hedge fund activity in these stocks.
Owens & Minor, Inc. (NYSE:OMI) investors should pay attention to a decrease in hedge fund sentiment lately. There were 16 hedge funds in our database with OMI holdings 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 Globus Medical Inc (NYSE:GMED), KBR, Inc. (NYSE:KBR), and Dillard’s, Inc. (NYSE:DDS) to gather more data points.
We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.
With all of this in mind, let’s take a look at the fresh action regarding Owens & Minor, Inc. (NYSE:OMI).
How have hedgies been trading Owens & Minor, Inc. (NYSE:OMI)?
At Q3’s end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 19% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in OMI heading into this year. With the smart money’s capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Pzena Investment Management, led by Richard S. Pzena, holds the biggest position in Owens & Minor, Inc. (NYSE:OMI). According to its latest 13F filing, the fund has a $32.7 million position in the stock, comprising 0.2% of its 13F portfolio. The second most bullish fund manager is Israel Englander’s Millennium Management, which holds a $26.7 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Other professional money managers that are bullish comprise Chuck Royce’s Royce & Associates, Cliff Asness’s AQR Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors. 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.