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Hedge Funds Are Crazy About Owens & Minor, Inc. (OMI)

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Owens & Minor, Inc. (NYSE:OMI) based on that data.

Is Owens & Minor, Inc. (NYSE:OMI) undervalued? The best stock pickers are turning bullish. The number of long hedge fund positions moved up by 5 lately. Our calculations also showed that OMI 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).

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.

Steven Cohen of Point72 Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a gander at the fresh hedge fund action regarding Owens & Minor, Inc. (NYSE:OMI).

Hedge fund activity in Owens & Minor, Inc. (NYSE:OMI)

Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 45% from the previous quarter. On the other hand, there were a total of 15 hedge funds with a bullish position in OMI 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.

When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies has the largest position in Owens & Minor, Inc. (NYSE:OMI), worth close to $27.7 million, comprising less than 0.1%% of its total 13F portfolio. On Renaissance Technologies’s heels is Chuck Royce of Royce & Associates, with a $18.8 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, D. E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to Owens & Minor, Inc. (NYSE:OMI), around 1.78% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, designating 0.59 percent of its 13F equity portfolio to OMI.

As aggregate interest increased, some big names were breaking ground themselves. Invenomic Capital Management, managed by Ali Motamed, assembled the largest position in Owens & Minor, Inc. (NYSE:OMI). Invenomic Capital Management had $2.2 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also initiated a $0.7 million position during the quarter. The following funds were also among the new OMI investors: Jonathan Soros’s JS Capital, Israel Englander’s Millennium Management, and Joel Greenblatt’s Gotham Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Owens & Minor, Inc. (NYSE:OMI) but similarly valued. These stocks are Brookdale Senior Living, Inc. (NYSE:BKD), Cornerstone Building Brands, Inc. (NYSE:CNR), OFG Bancorp (NYSE:OFG), and Archrock, Inc. (NYSE:AROC). All of these stocks’ market caps are closest to OMI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BKD 17 236242 -5
CNR 20 54192 -6
OFG 12 16250 1
AROC 11 13967 -4
Average 15 80163 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $80 million. That figure was $70 million in OMI’s case. Cornerstone Building Brands, Inc. (NYSE:CNR) is the most popular stock in this table. On the other hand Archrock, Inc. (NYSE:AROC) is the least popular one with only 11 bullish hedge fund positions. Owens & Minor, Inc. (NYSE:OMI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. Unfortunately OMI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on OMI were disappointed as the stock returned -19.4% during the same time period 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 many of these stocks already outperformed the market so far this year.

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