Did Hedge Funds Make The Right Call On Omnicell, Inc. (OMCL) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Omnicell, Inc. (NASDAQ:OMCL) based on that data and determine whether they were really smart about the stock.

Is Omnicell, Inc. (NASDAQ:OMCL) a worthy stock to buy now? Prominent investors were taking a bullish view. The number of long hedge fund positions improved by 4 recently. Our calculations also showed that OMCL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). OMCL was in 17 hedge funds’ portfolios at the end of March. There were 13 hedge funds in our database with OMCL positions at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.


Ken Fisher of Fisher Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s take a glance at the latest hedge fund action surrounding Omnicell, Inc. (NASDAQ:OMCL).

Hedge fund activity in Omnicell, Inc. (NASDAQ:OMCL)

At Q1’s end, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 31% from one quarter earlier. By comparison, 15 hedge funds held shares or bullish call options in OMCL a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Fisher Asset Management was the largest shareholder of Omnicell, Inc. (NASDAQ:OMCL), with a stake worth $14.8 million reported as of the end of September. Trailing Fisher Asset Management was Citadel Investment Group, which amassed a stake valued at $7.7 million. GLG Partners, Rhenman & Partners Asset Management, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Rhenman & Partners Asset Management allocated the biggest weight to Omnicell, Inc. (NASDAQ:OMCL), around 0.79% of its 13F portfolio. TwinBeech Capital is also relatively very bullish on the stock, earmarking 0.14 percent of its 13F equity portfolio to OMCL.

Now, key hedge funds have been driving this bullishness. Rhenman & Partners Asset Management, managed by Henrik Rhenman, initiated the most outsized position in Omnicell, Inc. (NASDAQ:OMCL). Rhenman & Partners Asset Management had $5.6 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $1.8 million position during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, Greg Eisner’s Engineers Gate Manager, and Robert B. Gillam’s McKinley Capital Management.

Let’s check out hedge fund activity in other stocks similar to Omnicell, Inc. (NASDAQ:OMCL). These stocks are El Paso Electric Company (NYSE:EE), Rexnord Corp (NYSE:RXN), Simpson Manufacturing Co, Inc. (NYSE:SSD), and New Relic Inc (NYSE:NEWR). All of these stocks’ market caps match OMCL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EE 23 398088 8
RXN 19 213250 -6
SSD 26 197022 2
NEWR 31 809963 -13
Average 24.75 404581 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $405 million. That figure was $55 million in OMCL’s case. New Relic Inc (NYSE:NEWR) is the most popular stock in this table. On the other hand Rexnord Corp (NYSE:RXN) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks Omnicell, Inc. (NASDAQ:OMCL) is even less popular than RXN. Hedge funds dodged a bullet by taking a bearish stance towards OMCL. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but managed to beat the market by 17.1 percentage points. Unfortunately OMCL wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); OMCL investors were disappointed as the stock returned 1.6% since Q1 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market so far in 2020.

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