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Is EMKR A Good Stock To Buy Now?

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Reymerlyn Martin
·5 min read
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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended September 30, so let’s proceed with the discussion of the hedge fund sentiment on EMCORE Corporation (NASDAQ:EMKR).

Is EMKR a good stock to buy now? The best stock pickers were cutting their exposure. The number of long hedge fund positions retreated by 2 in recent months. EMCORE Corporation (NASDAQ:EMKR) was in 12 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 16. Our calculations also showed that EMKR 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.

Today there are dozens of tools market participants employ to appraise stocks. A couple of the less known tools are hedge fund and insider trading signals. We have shown that, historically, those who follow the top picks of the top fund managers can beat the market by a superb amount (see the details here).

Eric Singer VIEX Capital
Eric Singer VIEX Capital

Eric Singer of VIEX Capital

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. Keeping this in mind we're going to check out the fresh hedge fund action regarding EMCORE Corporation (NASDAQ:EMKR).

Do Hedge Funds Think EMKR Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in EMKR a year ago. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Cannell Capital held the most valuable stake in EMCORE Corporation (NASDAQ:EMKR), which was worth $9.1 million at the end of the third quarter. On the second spot was Solas Capital Management which amassed $7.1 million worth of shares. VIEX Capital Advisors, Renaissance Technologies, 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 Solas Capital Management allocated the biggest weight to EMCORE Corporation (NASDAQ:EMKR), around 6.76% of its 13F portfolio. VIEX Capital Advisors is also relatively very bullish on the stock, earmarking 5.12 percent of its 13F equity portfolio to EMKR.

Because EMCORE Corporation (NASDAQ:EMKR) has witnessed bearish sentiment from the smart money, it's easy to see that there were a few funds who were dropping their positions entirely heading into Q4. Intriguingly, Matthew Hulsizer's PEAK6 Capital Management cut the biggest investment of the 750 funds tracked by Insider Monkey, valued at about $0.1 million in stock. Ken Griffin's fund, Citadel Investment Group, also dumped its stock, about $0 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds heading into Q4.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as EMCORE Corporation (NASDAQ:EMKR) but similarly valued. We will take a look at Tarena International Inc (NASDAQ:TEDU), Newpark Resources Inc (NYSE:NR), Crexendo, Inc. (NASDAQ:CXDO), Catalyst Biosciences Inc (NASDAQ:CBIO), Marchex, Inc. (NASDAQ:MCHX), Greenlane Holdings, Inc. (NASDAQ:GNLN), and On Deck Capital Inc (NYSE:ONDK). This group of stocks' market values match EMKR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TEDU,2,1089,0 NR,15,5725,-1 CXDO,4,775,4 CBIO,16,30921,-2 MCHX,10,21483,-2 GNLN,4,2272,0 ONDK,13,24345,-3 Average,9.1,12373,-0.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.1 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $33 million in EMKR's case. Catalyst Biosciences Inc (NASDAQ:CBIO) is the most popular stock in this table. On the other hand Tarena International Inc (NASDAQ:TEDU) is the least popular one with only 2 bullish hedge fund positions. EMCORE Corporation (NASDAQ:EMKR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for EMKR is 61.2. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on EMKR as the stock returned 34.5% since the end of Q3 (through 12/8) 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.

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