Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in OneSpan Inc. (NASDAQ:OSPN)? The smart money sentiment can provide an answer to this question.
Is OSPN a good stock to buy now? OneSpan Inc. (NASDAQ:OSPN) investors should be aware of a decrease in enthusiasm from smart money in recent months. OneSpan Inc. (NASDAQ:OSPN) was in 13 hedge funds’ portfolios at the end of September. The all time high for this statistic is 15. Our calculations also showed that OSPN 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.
Today there are a multitude of tools investors employ to grade publicly traded companies. A pair of the most underrated tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best investment managers can outclass the broader indices by a significant margin (see the details here).
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. With all of this in mind we’re going to take a look at the new hedge fund action surrounding OneSpan Inc. (NASDAQ:OSPN).
Do Hedge Funds Think OSPN Is A Good Stock To Buy Now?
At third quarter’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in OSPN over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
Among these funds, Sylebra Capital Management held the most valuable stake in OneSpan Inc. (NASDAQ:OSPN), which was worth $56.1 million at the end of the third quarter. On the second spot was Legion Partners Asset Management which amassed $47.7 million worth of shares. Hawk Ridge Management, Cannell Capital, and Archon 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 Legion Partners Asset Management allocated the biggest weight to OneSpan Inc. (NASDAQ:OSPN), around 11.42% of its 13F portfolio. Cannell Capital is also relatively very bullish on the stock, designating 2.52 percent of its 13F equity portfolio to OSPN.
Due to the fact that OneSpan Inc. (NASDAQ:OSPN) has faced declining sentiment from hedge fund managers, it’s safe to say that there were a few money managers who were dropping their positions entirely heading into Q4. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the largest stake of all the hedgies monitored by Insider Monkey, worth about $1.7 million in stock. Peter Algert and Kevin Coldiron’s fund, Algert Coldiron Investors, also said goodbye to its stock, about $1.7 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to OneSpan Inc. (NASDAQ:OSPN). These stocks are Veritex Holdings Inc (NASDAQ:VBTX), ProAssurance Corporation (NYSE:PRA), Vericel Corp (NASDAQ:VCEL), Morphic Holding, Inc. (NASDAQ:MORF), Cango Inc. (NYSE:CANG), Diversified Healthcare Trust (NASDAQ:DHC), and General American Investors Company, Inc. (NYSE:GAM). This group of stocks’ market caps resemble OSPN’s market cap.
|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 10 hedge funds with bullish positions and the average amount invested in these stocks was $62 million. That figure was $135 million in OSPN’s case. Vericel Corp (NASDAQ:VCEL) is the most popular stock in this table. On the other hand Cango Inc. (NYSE:CANG) 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. Our overall hedge fund sentiment score for OSPN is 59.6. 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. 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 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 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately OSPN wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on OSPN were disappointed as the stock returned 0.2% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.