Mario Gabelli’s GAMCO Investors disclosed on Tuesday a steep increase in its exposure to OMNOVA Solutions Inc. (NYSE:OMN). This $398 million market cap provider of emulsion polymers, specialty chemicals and decorative and functional (engineered) surfaces recently saw the fund add 1.18 million shares to its holding, versus 1.46 million shares disclosed by GAMCO earlier. Mr. Gabelli (through GAMCO, Gabelli Funds and Teton Advisors) now owns 2.64 million shares of the company, which account for more than 5.5% of its Common Stock.
This position makes of GAMCO Investors, Inc. ET AL the largest hedge fund shareholder of record –amongst those we track, at OMNOVA Solutions Inc. (NYSE:OMN). Other major hedge funds betting on this company are Jim Simons’ Renaissance Technologies, which owns 452,875 shares of the company, and Peter Schliemann’s Rutabaga Capital Management, which holds 793,883 shares of common stock.
OMNOVA Solutions Inc. (NYSE:OMN)’s stock has been on a downtrend lately –having lost 6.7% year-to-date, so one can understand Gabelli’s purchase as a circumstantial or opportunistic one. Since the stock currently trades at 17 times the company’s earnings, 2.1 times its book-value, and 0.4 times its sales (all below industry averages), this seems like a good time to buy, and analysts tend to agree.
Going forward, analysts expect OMNOVA Solutions Inc. (NYSE:OMN) to deliver average annual EPS growth rates around 20%, compared to a 12%-13% industry average. Nonetheless, the company has a history of missing estimates by a wide margin. Last quarter, OMNOVA was expected to retrieve earnings of $0.19 per share, but ended up reporting $0.09 per share, missing estimates by more than 50%. In the previous quarter, the difference between estimates and actual values was of 16.7%.
One thing is clear: prospects are not homogeneous for OMNOVA Solutions Inc. (NYSE:OMN). While some analysts expect the stock to rise and the company to grow, others see it as a stock to get rid of before it’s too late –or too cheap, actually. Yet, Mr. Gabelli seems quite bullish about it.
Other companies on which Gabelli is betting are DIRECTV (NASDAQ:DTV), American Express Company (NYSE:AXP) and Viacom, Inc. (NASDAQ:VIA). For more info, check out his top picks for the second quarter of 2014.
Disclosure: Javier Hasse holds no position in any stocks or funds mentioned.