Is Omnicell, Inc. (NASDAQ:OMCL) a good bet right now? We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Omnicell, Inc. (NASDAQ:OMCL) the right investment to pursue these days? Investors who are in the know are selling. The number of bullish hedge fund positions fell by 7 lately. 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 below for Q2 rankings). OMCL was in 11 hedge funds' portfolios at the end of September. There were 18 hedge funds in our database with OMCL positions at the end of the previous quarter. Video: Click the image to 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 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.
[caption id="attachment_25717" align="aligncenter" width="440"] Steven Cohen of Point72 Asset Management[/caption]
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. Let's analyze the fresh hedge fund action encompassing Omnicell, Inc. (NASDAQ:OMCL).
Hedge fund activity in Omnicell, Inc. (NASDAQ:OMCL)
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -39% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards OMCL over the last 17 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Omnicell, Inc. (NASDAQ:OMCL), with a stake worth $30.1 million reported as of the end of September. Trailing Fisher Asset Management was Point72 Asset Management, which amassed a stake valued at $22.6 million. AQR Capital Management, SG Capital Management, and Millennium 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 SG Capital Management allocated the biggest weight to Omnicell, Inc. (NASDAQ:OMCL), around 2.08% of its 13F portfolio. Intrinsic Edge Capital is also relatively very bullish on the stock, earmarking 0.6 percent of its 13F equity portfolio to OMCL.
Due to the fact that Omnicell, Inc. (NASDAQ:OMCL) has witnessed falling interest from the entirety of the hedge funds we track, it's easy to see that there lies a certain "tier" of fund managers that elected to cut their entire stakes last quarter. Intriguingly, Richard Driehaus's Driehaus Capital dropped the biggest investment of the "upper crust" of funds followed by Insider Monkey, comprising close to $5.2 million in stock, and David E. Shaw's D E Shaw was right behind this move, as the fund dumped about $3.9 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 7 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Omnicell, Inc. (NASDAQ:OMCL) but similarly valued. These stocks are HMS Holdings Corp. (NASDAQ:HMSY), Energizer Holdings, Inc. (NYSE:ENR), KB Home (NYSE:KBH), and Valmont Industries, Inc. (NYSE:VMI). This group of stocks' market caps are closest to OMCL's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMSY,21,126466,0 ENR,17,214912,0 KBH,26,572848,9 VMI,25,288741,0 Average,22.25,300742,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $301 million. That figure was $103 million in OMCL's case. KB Home (NYSE:KBH) is the most popular stock in this table. On the other hand Energizer Holdings, Inc. (NYSE:ENR) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Omnicell, Inc. (NASDAQ:OMCL) is even less popular than ENR. Hedge funds clearly dropped the ball on OMCL 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 OMCL as the stock returned 10.7% 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.