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Here’s What Hedge Funds Think About EMCORE Corporation (EMKR)

Reymerlyn Martin

Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of EMCORE Corporation (NASDAQ:EMKR).

EMCORE Corporation (NASDAQ:EMKR) investors should be aware of an increase in enthusiasm from smart money of late. EMKR was in 14 hedge funds' portfolios at the end of the first quarter of 2019. There were 8 hedge funds in our database with EMKR positions at the end of the previous quarter. Our calculations also showed that EMKR isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Matthew Drapkin - Becker Drapkin Management

We're going to take a glance at the fresh hedge fund action encompassing EMCORE Corporation (NASDAQ:EMKR).

What does smart money think about EMCORE Corporation (NASDAQ:EMKR)?

At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 75% from the fourth quarter of 2018. By comparison, 11 hedge funds held shares or bullish call options in EMKR a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

EMKR_jun2019

The largest stake in EMCORE Corporation (NASDAQ:EMKR) was held by Becker Drapkin Management, which reported holding $9.1 million worth of stock at the end of March. It was followed by Ariel Investments with a $5.6 million position. Other investors bullish on the company included Royce & Associates, Renaissance Technologies, and P.A.W. CAPITAL PARTNERS.

Consequently, some big names have jumped into EMCORE Corporation (NASDAQ:EMKR) headfirst. VIEX Capital Advisors, managed by Eric Singer, assembled the most outsized position in EMCORE Corporation (NASDAQ:EMKR). VIEX Capital Advisors had $0.7 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $0.3 million position during the quarter. The following funds were also among the new EMKR investors: Ken Griffin's Citadel Investment Group, Thomas E. Claugus's GMT Capital, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

Let's check out hedge fund activity in other stocks similar to EMCORE Corporation (NASDAQ:EMKR). We will take a look at Alta Mesa Resources, Inc. (NASDAQ:AMR), PFSweb, Inc. (NASDAQ:PFSW), Volt Information Sciences, Inc. (NYSE:VISI), and Coda Octopus Group, Inc. (NASDAQ:CODA). All of these stocks' market caps resemble EMKR's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AMR,16,19132,-3 PFSW,5,9561,-1 VISI,5,5573,2 CODA,3,826,2 Average,7.25,8773,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $9 million. That figure was $27 million in EMKR's case. Alta Mesa Resources, Inc. (NASDAQ:AMR) is the most popular stock in this table. On the other hand Coda Octopus Group, Inc. (NASDAQ:CODA) is the least popular one with only 3 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. 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately EMKR wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EMKR were disappointed as the stock returned -7.1% during the same period 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 13 of these stocks already outperformed the market so far in Q2.

Disclosure: None. This article was originally published at Insider Monkey.

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