Is OMC Stock a Buy or a Sell?
Most investors tend to think of hedge funds and other asset managers as worthless because they can’t even beat simple index fund portfolios. In fact, most people expect hedge funds to compete and outperform the bull market that we have seen in recent years. However, hedge funds are usually partially hedged and aim to offer attractive risk-adjusted returns rather than following the ups and downs of the stock market in the hope that they will outperform the market as a whole. Our research shows that some hedge funds have excellent stock selection skills (and we can identify these hedge funds in advance quite precisely), so let’s take a look at the sentiment of smart money towards Omnicom. Group Inc. (NYSE:WTO).
Is WTO action a purchase? Interest of hedge funds in Omnicom Group Inc. (NYSE:WTO) stocks were flat at the end of the last quarter. This is usually a negative indicator. Our calculations also showed that the WTO is not one of the 30 most popular stocks among hedge funds (click for Q4 ranking). The level and evolution of the popularity of hedge funds are not the only variables to analyze in deciphering the outlook for hedge funds. A stock may experience a surge in popularity, but it may still be less popular than similarly priced stocks. That’s why, at the end of this article, we’ll be looking at companies like Ally Financial Inc (NYSE:ALLY), C3.ai, Inc. (NYSE:AI) and WPP Plc (NYSE:WPP) to collect more data points.
So why do we pay attention to hedge fund sentiment before making investment decisions? Our research has shown that small-cap hedge fund stock picks managed to beat the market in double digits per year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by more than 124 percentage points since March 2017 (see details here).
David Harding of Winton Capital Management
At Insider Monkey, we leave no stone unturned when searching for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So we check this under the radar cannabis stock at present. We go through lists like the 10 best stocks of batteries to buy to identify the next stock with a 10x upside potential. Even though we only recommend positions in a tiny fraction of the companies we analyze, we check as many stocks as possible. We read letters from hedge fund investors and listen to stock market pitches at hedge fund conferences. You can subscribe to our free daily newsletter at our website. Now let’s take a look at the new hedge fund action surrounding Omnicom Group Inc. (NYSE:WTO).
Do hedge funds think the WTO is a good stock to buy now?
At the end of the fourth quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on the stock, a change of 0% from the previous quarter. In contrast, there were a total of 22 hedge funds with a bullish position in the WTO a year ago. With hedge fund sentiment swirling, there is a select group of outstanding hedge fund managers who were raising their stakes significantly (or had already racked up significant positions).
Of these funds, Citadel Investment Group held the most valuable stake in Omnicom Group Inc. (NYSE: OMC), which was worth $ 170.9 million at the end of the fourth quarter. In second place, AQR Capital Management raised $ 76.3 million in shares. Millennium Management, DE Shaw and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders in the company. In terms of portfolio weights assigned to each position Cinctive capital management attributed the most weight to Omnicom Group Inc. (NYSE: OMC), or approximately 0.63% of its 13F portfolio. TwinBeech Capital is also relatively very bullish on the stock, setting aside 0.43% of its 13F equity portfolio at OMC.
Given that Omnicom Group Inc. (NYSE: OMC) has seen a decline in interest from all of the hedge funds we track, we can see that there is a sect of fund managers who have reduced all of their holdings last quarter. It should be mentioned that Paul Tudor Jones’s Tudor Investment Corp cut the largest position of all hedges, followed by Insider Monkey, totaling around $ 1.4 million in shares, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind the move, as the fund told the review to about $ 0.9 million. These movements are interesting, because the overall interest of hedge funds has remained the same (this is a bearish signal in our experience).
Let’s also look at hedge fund activity in other stocks – not necessarily in the same industry as Omnicom Group Inc. (NYSE: OMC) but similarly valued. These stocks are Ally Financial Inc (NYSE:ALLY), C3.ai, Inc. (NYSE:AI), WPP Plc (NYSE:WPP), The JM Smucker Company (NYSE:SJM), James Hardie Industries plc (NYSE:JHX), DaVita Inc (NYSE:DVA) and Raymond James Financial, Inc. (NYSE:RJF). The market capitalization of this group of stocks is similar to the market capitalization of OMC.
[table] Ticker, Number of I / O with positions, Total value of I / O positions (x1000), Change of position HF ALLY, 57.2593837.4 AI, 37.483532.37 WPP, 6.37552, -1 SJM, 34, 580428.3 JHX, 4.11803.0 DVA, 32.4814258, -2 RJF, 34.580848.6 Medium, 29.1,1300323,6,7 [/table]
See the table here if you have formatting problems.
As you can see, these stocks had an average of 29.1 hedge funds with bullish positions and the average amount invested in these stocks was $ 1300 million. That figure was $ 547 million in the case of WTO. Ally Financial Inc (NYSE:ALLY) is the most popular stock in this table. On the other hand James Hardie Industries plc (NYSE:JHX) is the least popular with only 4 bullish hedge fund positions. Omnicom Group Inc. (NYSE: OMC) is not the most popular stock in this group, but hedge fund interest is still above average. Our overall hedge fund sentiment score for OMC is 63.3. Stocks with a 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 have shown that top 30 most popular stocks among hedge funds, a return of 81.2% in 2019 and 2020 and an outperformance of 26 percentage points compared to the S&P 500 ETF (SPY). These stocks gained 7.9% in 2021 through April 1 and still beat the market by 0.4 percentage point. Hedge funds were also right to bet on OMC, with the stock having returned 21.7% since the end of the fourth quarter (up 4/1) and outperforming the market. Hedge funds have been rewarded for their relative optimism.
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Disclosure: None. This article originally appeared on Monkey Insider.