In this article we will check out the progression of hedge fund sentiment towards Omnicom Group Inc. (NYSE:OMC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Omnicom Group Inc. (NYSE:OMC) was in 31 hedge funds’ portfolios at the end of the first quarter of 2020. OMC has experienced an increase in activity from the world’s largest hedge funds recently. There were 22 hedge funds in our database with OMC positions at the end of the previous quarter. Our calculations also showed that OMC 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.
According to most traders, hedge funds are perceived as worthless, old financial vehicles of years past. While there are greater than 8000 funds with their doors open at present, Our researchers hone in on the aristocrats of this group, about 850 funds. It is estimated that this group of investors direct bulk of the hedge fund industry’s total capital, and by paying attention to their matchless picks, Insider Monkey has identified a few investment strategies that have historically outstripped the market. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a gander at the new hedge fund action surrounding Omnicom Group Inc. (NYSE:OMC).
What have hedge funds been doing with Omnicom Group Inc. (NYSE:OMC)?
At the end of the first quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 41% from the fourth quarter of 2019. By comparison, 20 hedge funds held shares or bullish call options in OMC a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Among these funds, Pzena Investment Management held the most valuable stake in Omnicom Group Inc. (NYSE:OMC), which was worth $87 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $48.9 million worth of shares. Ariel Investments, Citadel Investment Group, and Marshall Wace LLP 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 L2 Asset Management allocated the biggest weight to Omnicom Group Inc. (NYSE:OMC), around 1.82% of its 13F portfolio. Cognios Capital is also relatively very bullish on the stock, earmarking 0.73 percent of its 13F equity portfolio to OMC.
With a general bullishness amongst the heavyweights, specific money managers have jumped into Omnicom Group Inc. (NYSE:OMC) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the largest position in Omnicom Group Inc. (NYSE:OMC). Marshall Wace LLP had $20.3 million invested in the company at the end of the quarter. Robert Pitts’s Steadfast Capital Management also made a $17 million investment in the stock during the quarter. The other funds with new positions in the stock are D. E. Shaw’s D E Shaw, David Costen Haley’s HBK Investments, and Lee Ainslie’s Maverick Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Omnicom Group Inc. (NYSE:OMC) but similarly valued. We will take a look at Paycom Software Inc (NYSE:PAYC), Steris Plc (NYSE:STE), CrowdStrike Holdings, Inc. (NASDAQ:CRWD), and Rollins, Inc. (NYSE:ROL). This group of stocks’ market valuations resemble OMC’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 38.75 hedge funds with bullish positions and the average amount invested in these stocks was $636 million. That figure was $328 million in OMC’s case. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is the most popular stock in this table. On the other hand Rollins, Inc. (NYSE:ROL) is the least popular one with only 25 bullish hedge fund positions. Omnicom Group Inc. (NYSE:OMC) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 8.3% in 2020 through the end of May and surpassed the market by 13.2 percentage points. Unfortunately OMC wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); OMC investors were disappointed as the stock returned -0.2% during the second quarter 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 in 2020.
Disclosure: None. This article was originally published at Insider Monkey.