Owens & Minor, Inc. (OMI) Fell Out Of Favor With Hedge Funds

The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded Owens & Minor, Inc. (NYSE:OMI) based on those filings.

Is Owens & Minor, Inc. (NYSE:OMI) a splendid investment now? Prominent investors were getting less bullish. The number of long hedge fund bets dropped by 4 lately. Owens & Minor, Inc. (NYSE:OMI) was in 16 hedge funds’ portfolios at the end of March. The all time high for this statistic is 20. Our calculations also showed that OMI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 20 hedge funds in our database with OMI holdings at the end of December.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 115 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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind let’s take a gander at the key hedge fund action regarding Owens & Minor, Inc. (NYSE:OMI).

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

At the end of March, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options 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.

More specifically, Renaissance Technologies was the largest shareholder of Owens & Minor, Inc. (NYSE:OMI), with a stake worth $89 million reported as of the end of March. Trailing Renaissance Technologies was Deerfield Management, which amassed a stake valued at $58.2 million. D E Shaw, Royce & Associates, and Citadel Investment Group 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 Deerfield Management allocated the biggest weight to Owens & Minor, Inc. (NYSE:OMI), around 1.22% of its 13F portfolio. Endurant Capital Management is also relatively very bullish on the stock, setting aside 0.63 percent of its 13F equity portfolio to OMI.

Seeing as Owens & Minor, Inc. (NYSE:OMI) has witnessed a decline in interest from the smart money, we can see that there lies a certain “tier” of fund managers who sold off their full holdings last quarter. It’s worth mentioning that Kevin Molloy’s Iron Triangle Partners sold off the biggest stake of the 750 funds tracked by Insider Monkey, totaling about $12.3 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund dropped about $12 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Owens & Minor, Inc. (NYSE:OMI) but similarly valued. We will take a look at Intra-Cellular Therapies Inc (NASDAQ:ITCI), SkyWest, Inc. (NASDAQ:SKYW), Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), Matador Resources Co (NYSE:MTDR), Clean Energy Fuels Corp (NASDAQ:CLNE), Veoneer, Inc. (NYSE:VNE), and Noah Holdings Limited (NYSE:NOAH). This group of stocks’ market caps resemble OMI’s market cap.

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As you can see these stocks had an average of 15.4 hedge funds with bullish positions and the average amount invested in these stocks was $272 million. That figure was $273 million in OMI’s case. Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) is the most popular stock in this table. On the other hand Noah Holdings Limited (NYSE:NOAH) is the least popular one with only 12 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. Our overall hedge fund sentiment score for OMI is 45. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Hedge funds were also right about betting on OMI as the stock returned 24.3% since the end of Q1 (through 7/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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