Did Hedge Funds Drop The Ball On OMNOVA Solutions Inc. (OMN)?

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was OMNOVA Solutions Inc. (NYSE:OMN).

OMNOVA Solutions Inc. (NYSE:OMN) shareholders have witnessed a decrease in enthusiasm from smart money recently. OMN was in 16 hedge funds’ portfolios at the end of the second quarter of 2019. There were 17 hedge funds in our database with OMN holdings at the end of the previous quarter. Our calculations also showed that OMN isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Today there are a lot of signals market participants have at their disposal to size up their stock investments. A pair of the best signals are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the best fund managers can outpace the market by a very impressive amount (see the details here).

D. E. Shaw

In addition to following the biggest hedge funds for investment ideas, we also share stock pitches from conferences, investor letters and other sources  like this one where the fund manager is talking about two under the radar 1000% return potential stocks: first one in internet infrastructure and the second in the heart of advertising market. We use hedge fund buy/sell signals to determine whether to conduct in-depth analysis of these stock ideas which take days. Let’s take a gander at the key hedge fund action encompassing OMNOVA Solutions Inc. (NYSE:OMN).

How are hedge funds trading OMNOVA Solutions Inc. (NYSE:OMN)?

At the end of the second quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards OMN over the last 16 quarters. With hedge funds’ sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

No of Hedge Funds with OMN Positions

The largest stake in OMNOVA Solutions Inc. (NYSE:OMN) was held by Renaissance Technologies, which reported holding $12.5 million worth of stock at the end of March. It was followed by GAMCO Investors with a $7.3 million position. Other investors bullish on the company included Barington Capital Group, Scopus Asset Management, and D E Shaw.

Since OMNOVA Solutions Inc. (NYSE:OMN) has faced declining sentiment from the aggregate hedge fund industry, we can see that there were a few hedge funds that decided to sell off their full holdings in the second quarter. It’s worth mentioning that Roger Ibbotson’s Zebra Capital Management dumped the biggest position of all the hedgies monitored by Insider Monkey, valued at an estimated $0.1 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also cut its stock, about $0 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds in the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as OMNOVA Solutions Inc. (NYSE:OMN) but similarly valued. These stocks are Daktronics, Inc. (NASDAQ:DAKT), Southern First Bancshares, Inc. (NASDAQ:SFST), Sientra Inc (NASDAQ:SIEN), and Preformed Line Products Company (NASDAQ:PLPC). This group of stocks’ market caps match OMN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DAKT 9 16137 -1
SFST 7 38113 0
SIEN 19 100867 5
PLPC 5 30712 -2
Average 10 46457 0.5

View table here if you experience formatting issues.

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 $46 million. That figure was $48 million in OMN’s case. Sientra Inc (NASDAQ:SIEN) is the most popular stock in this table. On the other hand Preformed Line Products Company (NASDAQ:PLPC) is the least popular one with only 5 bullish hedge fund positions. OMNOVA Solutions Inc. (NYSE:OMN) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on OMN as the stock returned 61.6% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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