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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Ooma Inc (NYSE:OOMA) makes for a good investment right now.
Is OOMA a good stock to buy now? Ooma Inc (NYSE:OOMA) has seen a decrease in activity from the world's largest hedge funds recently. Ooma Inc (NYSE:OOMA) was in 15 hedge funds' portfolios at the end of September. The all time high for this statistic is 17. Our calculations also showed that OOMA 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.
Julian Robertson of Tiger Management
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 let's take a peek at the fresh hedge fund action surrounding Ooma Inc (NYSE:OOMA).
Do Hedge Funds Think OOMA Is A Good Stock To Buy Now?
At Q3's end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the previous quarter. On the other hand, there were a total of 14 hedge funds with a bullish position in OOMA a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Woodson Capital Management held the most valuable stake in Ooma Inc (NYSE:OOMA), which was worth $24.1 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $13.6 million worth of shares. Trigran Investments, Headlands Capital, and Tiger 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 Headlands Capital allocated the biggest weight to Ooma Inc (NYSE:OOMA), around 10.27% of its 13F portfolio. Tiger Management is also relatively very bullish on the stock, setting aside 2.75 percent of its 13F equity portfolio to OOMA.
Since Ooma Inc (NYSE:OOMA) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of money managers who sold off their entire stakes heading into Q4. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital sold off the biggest investment of the "upper crust" of funds followed by Insider Monkey, totaling about $0.7 million in stock, and Josh Goldberg's G2 Investment Partners Management was right behind this move, as the fund dumped about $0.4 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Ooma Inc (NYSE:OOMA) but similarly valued. These stocks are Concert Pharmaceuticals Inc (NASDAQ:CNCE), Urovant Sciences Ltd. (NASDAQ:UROV), Utah Medical Products, Inc. (NASDAQ:UTMD), Midland States Bancorp, Inc. (NASDAQ:MSBI), The Manitowoc Company, Inc. (NYSE:MTW), Verona Pharma plc (NASDAQ:VRNA), and Spero Therapeutics, Inc. (NASDAQ:SPRO). This group of stocks' market values are closest to OOMA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CNCE,16,79858,3 UROV,6,39936,-1 UTMD,7,28875,0 MSBI,10,9359,0 MTW,21,30600,2 VRNA,11,136859,7 SPRO,12,87035,4 Average,11.9,58932,2.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.9 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $83 million in OOMA's case. The Manitowoc Company, Inc. (NYSE:MTW) is the most popular stock in this table. On the other hand Urovant Sciences Ltd. (NASDAQ:UROV) is the least popular one with only 6 bullish hedge fund positions. Ooma Inc (NYSE:OOMA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for OOMA is 59.5. 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. Hedge funds were also right about betting on OOMA as the stock returned 25.7% since the end of Q3 (through 12/14) 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.