The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 700 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider OneSpan Inc. (NASDAQ:OSPN) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Hedge fund interest in OneSpan Inc. (NASDAQ:OSPN) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as ConnectOne Bancorp Inc (NASDAQ:CNOB), Tortoise MLP Fund, Inc. (NYSE:NTG), and 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS) to gather more data points.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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 our short portfolio.
Cliff Asness of AQR Capital Management
Let’s review the fresh hedge fund action regarding OneSpan Inc. (NASDAQ:OSPN).
How have hedgies been trading OneSpan Inc. (NASDAQ:OSPN)?
Heading into the fourth quarter of 2018, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, representing no change from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards OSPN over the last 13 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in OneSpan Inc. (NASDAQ:OSPN) was held by Legion Partners Asset Management, which reported holding $38.3 million worth of stock at the end of September. It was followed by Private Capital Management with a $11.1 million position. Other investors bullish on the company included D E Shaw, AQR Capital Management, and Renaissance Technologies.
Seeing as OneSpan Inc. (NASDAQ:OSPN) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies who sold off their positions entirely last quarter. Intriguingly, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors said goodbye to the biggest position of the 700 funds tracked by Insider Monkey, totaling about $2.5 million in stock, and Ernest Chow and Jonathan Howe’s Sensato Capital Management was right behind this move, as the fund sold off about $0.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as OneSpan Inc. (NASDAQ:OSPN) but similarly valued. We will take a look at ConnectOne Bancorp Inc (NASDAQ:CNOB), Tortoise MLP Fund, Inc. (NYSE:NTG), 1-800-FLOWERS.COM, Inc. (NASDAQ:FLWS), and Midland States Bancorp, Inc. (NASDAQ:MSBI). All of these stocks’ market caps are similar to OSPN’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CNOB | 15 | 52695 | 3 |
| NTG | 2 | 7538 | -2 |
| FLWS | 14 | 47292 | 1 |
| MSBI | 4 | 3624 | 0 |
| Average | 8.75 | 27787 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $80 million in OSPN’s case. ConnectOne Bancorp Inc (NASDAQ:CNOB) is the most popular stock in this table. On the other hand Tortoise MLP Fund, Inc. (NYSE:NTG) is the least popular one with only 2 bullish hedge fund positions. OneSpan Inc. (NASDAQ:OSPN) 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. In this regard CNOB might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.