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In this article we will analyze whether eGain Corporation (NASDAQ:EGAN) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is EGAN a good stock to buy now? Hedge fund interest in eGain Corporation (NASDAQ:EGAN) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that EGAN 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). At the end of this article we will also compare EGAN to other stocks including Luther Burbank Corporation (NASDAQ:LBC), Boston Omaha Corporation (NASDAQ:BOMN), and Catchmark Timber Trust Inc (NYSE:CTT) to get a better sense of its popularity.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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 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.
Louis Navellier of Navellier & Associates
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. Now we're going to take a peek at the latest hedge fund action regarding eGain Corporation (NASDAQ:EGAN).
Do Hedge Funds Think EGAN Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards EGAN over the last 21 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
The largest stake in eGain Corporation (NASDAQ:EGAN) was held by Renaissance Technologies, which reported holding $24.6 million worth of stock at the end of September. It was followed by D E Shaw with a $3.6 million position. Other investors bullish on the company included Two Sigma Advisors, Arrowstreet Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Navellier & Associates allocated the biggest weight to eGain Corporation (NASDAQ:EGAN), around 0.06% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, setting aside 0.03 percent of its 13F equity portfolio to EGAN.
Since eGain Corporation (NASDAQ:EGAN) has witnessed a decline in interest from the smart money, it's safe to say that there lies a certain "tier" of fund managers who sold off their entire stakes heading into Q4. Intriguingly, Minhua Zhang's Weld Capital Management dropped the largest investment of the 750 funds monitored by Insider Monkey, totaling an estimated $0.2 million in stock, and Peter Algert and Kevin Coldiron's Algert Coldiron Investors was right behind this move, as the fund said goodbye to about $0.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's also examine hedge fund activity in other stocks similar to eGain Corporation (NASDAQ:EGAN). These stocks are Luther Burbank Corporation (NASDAQ:LBC), Boston Omaha Corporation (NASDAQ:BOMN), Catchmark Timber Trust Inc (NYSE:CTT), Aegion Corp (NASDAQ:AEGN), Mercer International Inc. (NASDAQ:MERC), Altimmune, Inc. (NASDAQ:ALT), and Cambium Networks Corporation (NASDAQ:CMBM). This group of stocks' market values are closest to EGAN's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LBC,4,3020,2 BOMN,5,166210,-7 CTT,13,53862,4 AEGN,9,13719,-1 MERC,13,82614,3 ALT,18,144736,6 CMBM,6,4612,4 Average,9.7,66968,1.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $67 million. That figure was $36 million in EGAN's case. Altimmune, Inc. (NASDAQ:ALT) is the most popular stock in this table. On the other hand Luther Burbank Corporation (NASDAQ:LBC) is the least popular one with only 4 bullish hedge fund positions. eGain Corporation (NASDAQ:EGAN) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EGAN is 53.6. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 32.9% in 2020 through December 8th and beat the market again by 16.2 percentage points. Unfortunately EGAN wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EGAN were disappointed as the stock returned -18.5% since the end of September (through 12/8) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.