Coliseum Capital Management, a major holder of Owens & Minor (OMI), recently bought over 935,000 shares across two transactions. The buy increased the fund’s position by 4%, and came to a total cost of $7.3 million.
The fund was a bigger buyer of shares in February, paying $27.8 million to increase their position by 17% back in February. Going further back, company insiders were largely sellers of shares, at substantially higher prices than where shares trade today.
Overall, Owens & Minor insiders own 3.2% of shares, and institutions own the rest of the float.
The medical products distribution company has slid 70% over the past year.
Operationally, shares have performed poorly, with revenues up 1.5%, but with the company posting a small loss after its costs. Owens & Minor also has over $2 billion in debt on its balance sheet, which makes the company highly leveraged right now.
Shares are priced at 4 times forward earnings estimates, certainly making shares look like a value here. But if OMI can’t improve its cash flow situation, shares look more like a value trap at current prices.
Action to take: Even with fund buying here, Owens & Minor shares have just re-tested their 52-week low. Interested investors should hold off until a sustainable uptrend is clear to avoid a value trap.
For traders, the September $5 puts, last trading for about $0.45, could see mid-double-digit gains if shares see further weakness in the months ahead.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.