Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Omnicom Group Inc. (NYSE:OMC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Omnicom Group Inc. (NYSE:OMC) undervalued? The best stock pickers were getting less optimistic. The number of long hedge fund positions shrunk by 3 lately. Omnicom Group Inc. (NYSE:OMC) was in 30 hedge funds' portfolios at the end of June. The all time high for this statistic is 34. Our calculations also showed that OMC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).
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 79 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.
Ken Griffin of Citadel Investment Group
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Do Hedge Funds Think OMC Is A Good Stock To Buy Now?
At Q2's end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the previous quarter. On the other hand, there were a total of 31 hedge funds with a bullish position in OMC a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of Omnicom Group Inc. (NYSE:OMC), with a stake worth $131.6 million reported as of the end of June. Trailing Millennium Management was Citadel Investment Group, which amassed a stake valued at $125.5 million. Renaissance Technologies, D E Shaw, and Ariel Investments 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 Zeno Research allocated the biggest weight to Omnicom Group Inc. (NYSE:OMC), around 7.43% of its 13F portfolio. Candlestick Capital Management is also relatively very bullish on the stock, setting aside 1.02 percent of its 13F equity portfolio to OMC.
Because Omnicom Group Inc. (NYSE:OMC) has witnessed bearish sentiment from the entirety of the hedge funds we track, we can see that there were a few money managers who sold off their positions entirely by the end of the second quarter. At the top of the heap, Michael Gelband's ExodusPoint Capital dumped the largest stake of the "upper crust" of funds followed by Insider Monkey, comprising close to $4.6 million in stock. Brandon Haley's fund, Holocene Advisors, also sold off its stock, about $2.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds by the end of the second quarter.
Let's now take a look at hedge fund activity in other stocks similar to Omnicom Group Inc. (NYSE:OMC). These stocks are Principal Financial Group Inc (NASDAQ:PFG), Huazhu Group Limited (NASDAQ:HTHT), Zendesk Inc (NYSE:ZEN), Bill.com Holdings, Inc. (NYSE:BILL), CMS Energy Corporation (NYSE:CMS), Hologic, Inc. (NASDAQ:HOLX), and Monolithic Power Systems, Inc. (NASDAQ:MPWR). This group of stocks' market values resemble OMC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PFG,18,217118,-13 HTHT,27,657115,0 ZEN,52,1851946,7 BILL,53,2766914,2 CMS,31,693813,3 HOLX,41,977376,9 MPWR,34,702043,2 Average,36.6,1123761,1.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.6 hedge funds with bullish positions and the average amount invested in these stocks was $1124 million. That figure was $669 million in OMC's case. Bill.com Holdings, Inc. (NYSE:BILL) is the most popular stock in this table. On the other hand Principal Financial Group Inc (NASDAQ:PFG) is the least popular one with only 18 bullish hedge fund positions. Omnicom Group Inc. (NYSE:OMC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for OMC is 45.6. 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 negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.9% in 2021 through October 15th and surpassed the market again by 4.5 percentage points. Unfortunately OMC wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); OMC investors were disappointed as the stock returned -3.3% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.