Is OMCL A Good Stock To Buy Now?

In this article you are going to find out whether hedge funds think Omnicell, Inc. (NASDAQ:OMCL) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is OMCL a good stock to buy now? Omnicell, Inc. (NASDAQ:OMCL) has seen an increase in hedge fund interest in recent months. Omnicell, Inc. (NASDAQ:OMCL) was in 22 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 16 hedge funds in our database with OMCL positions at the end of the second quarter. Our calculations also showed that OMCL isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to take a look at the new hedge fund action surrounding Omnicell, Inc. (NASDAQ:OMCL).

Do Hedge Funds Think OMCL Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2020, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 38% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in OMCL over the last 21 quarters. With hedge funds’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in Omnicell, Inc. (NASDAQ:OMCL) was held by Arrowstreet Capital, which reported holding $30.5 million worth of stock at the end of September. It was followed by Point72 Asset Management with a $23.4 million position. Other investors bullish on the company included Fisher Asset Management, Intrinsic Edge Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to Omnicell, Inc. (NASDAQ:OMCL), around 0.69% of its 13F portfolio. Segantii Capital is also relatively very bullish on the stock, setting aside 0.2 percent of its 13F equity portfolio to OMCL.

Consequently, specific money managers were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, established the most valuable position in Omnicell, Inc. (NASDAQ:OMCL). Point72 Asset Management had $23.4 million invested in the company at the end of the quarter. Mark Coe’s Intrinsic Edge Capital also initiated a $10.1 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, David Costen Haley’s HBK Investments, and Michael Platt and William Reeves’s BlueCrest Capital Mgmt..

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Omnicell, Inc. (NASDAQ:OMCL) but similarly valued. We will take a look at Taylor Morrison Home Corp (NYSE:TMHC), Western Alliance Bancorporation (NYSE:WAL), WNS (Holdings) Limited (NYSE:WNS), Goosehead Insurance, Inc. (NASDAQ:GSHD), Affiliated Managers Group, Inc. (NYSE:AMG), KBR, Inc. (NYSE:KBR), and Portland General Electric Company (NYSE:POR). This group of stocks’ market valuations are closest to OMCL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TMHC 35 311698 2
WAL 28 125862 4
WNS 21 265140 1
GSHD 22 142736 7
AMG 23 312850 -4
KBR 38 625767 3
POR 24 178843 3
Average 27.3 280414 2.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $280 million. That figure was $116 million in OMCL’s case. KBR, Inc. (NYSE:KBR) is the most popular stock in this table. On the other hand WNS (Holdings) Limited (NYSE:WNS) is the least popular one with only 21 bullish hedge fund positions. Omnicell, Inc. (NASDAQ:OMCL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OMCL is 42.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on OMCL as the stock returned 53% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.

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