Should You Buy OneSpan Inc. (OSPN)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4 years and analyze what the smart money thinks of OneSpan Inc. (NASDAQ:OSPN) based on that data.

OneSpan Inc. (NASDAQ:OSPN) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 10 hedge funds’ portfolios at the end of September. At the end of this article we will also compare OSPN to other stocks including Renewable Energy Group Inc (NASDAQ:REGI), Hersha Hospitality Trust (NYSE:HT), and CorePoint Lodging Inc. (NYSE:CPLG) to get a better sense of its popularity.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Cliff Asness of AQR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a glance at the recent hedge fund action encompassing OneSpan Inc. (NASDAQ:OSPN).

What have hedge funds been doing with OneSpan Inc. (NASDAQ:OSPN)?

At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in OSPN over the last 17 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Legion Partners Asset Management held the most valuable stake in OneSpan Inc. (NASDAQ:OSPN), which was worth $35 million at the end of the third quarter. On the second spot was Ancora Advisors which amassed $15.2 million worth of shares. Archon Capital Management, D E Shaw, and AQR 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 8.6% of its 13F portfolio. Archon Capital Management is also relatively very bullish on the stock, designating 2.27 percent of its 13F equity portfolio to OSPN.

Because OneSpan Inc. (NASDAQ:OSPN) has faced bearish sentiment from the aggregate hedge fund industry, it’s easy to see that there exists a select few hedge funds that decided to sell off their full holdings by the end of the third quarter. Interestingly, Matthew Hulsizer’s PEAK6 Capital Management dumped the biggest position of the 750 funds followed by Insider Monkey, valued at about $1.8 million in stock. Ken Griffin’s fund, Citadel Investment Group, also cut its stock, about $1.3 million worth. These moves are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks similar to OneSpan Inc. (NASDAQ:OSPN). We will take a look at Renewable Energy Group Inc (NASDAQ:REGI), Hersha Hospitality Trust (NYSE:HT), CorePoint Lodging Inc. (NYSE:CPLG), and MeiraGTx Holdings plc (NASDAQ:MGTX). This group of stocks’ market values match OSPN’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
REGI 16 89440 -1
HT 13 17504 1
CPLG 10 32667 2
MGTX 13 191351 4
Average 13 82741 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $83 million. That figure was $70 million in OSPN’s case. Renewable Energy Group Inc (NASDAQ:REGI) is the most popular stock in this table. On the other hand CorePoint Lodging Inc. (NYSE:CPLG) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks OneSpan Inc. (NASDAQ:OSPN) is even less popular than CPLG. Hedge funds clearly dropped the ball on OSPN as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on OSPN as the stock returned 28.6% during the fourth quarter (through the end of November) and outperformed the market by an even larger margin.

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