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Hedge Funds Watching Qumu Corp (QUMU) From Afar

Abigail Fisher

We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds' top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Qumu Corp (NASDAQ:QUMU).

Qumu Corp (NASDAQ:QUMU) investors should pay attention to an increase in support from the world's most elite money managers lately. Our calculations also showed that QUMU isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26073" align="aligncenter" width="450"] Jim Simons Founder of Renaissance Technologies[/caption]

RENAISSANCE TECHNOLOGIES

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. We're going to analyze the recent hedge fund action regarding Qumu Corp (NASDAQ:QUMU).

Hedge fund activity in Qumu Corp (NASDAQ:QUMU)

Heading into the fourth quarter of 2019, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the second quarter of 2019. By comparison, 1 hedge funds held shares or bullish call options in QUMU a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

QUMU_nov2019

The largest stake in Qumu Corp (NASDAQ:QUMU) was held by Harbert Management, which reported holding $4.1 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $2.5 million position. The only other hedge fund that is bullish on the company was Emancipation Capital.

As aggregate interest increased, key hedge funds have jumped into Qumu Corp (NASDAQ:QUMU) headfirst. Emancipation Capital, managed by Charles Frumberg, established the largest position in Qumu Corp (NASDAQ:QUMU). Emancipation Capital had $0.3 million invested in the company at the end of the quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Qumu Corp (NASDAQ:QUMU) but similarly valued. These stocks are DGSE Companies, Inc. (NYSE:DGSE), Acer Therapeutics Inc. (NASDAQ:ACER), Celldex Therapeutics, Inc. (NASDAQ:CLDX), and General Moly, Inc. (NYSE:GMO). This group of stocks' market values are similar to QUMU's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DGSE,3,277,2 ACER,4,3342,2 CLDX,4,2337,1 GMO,1,80,0 Average,3,1509,1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 3 hedge funds with bullish positions and the average amount invested in these stocks was $2 million. That figure was $7 million in QUMU's case. Acer Therapeutics Inc. (NASDAQ:ACER) is the most popular stock in this table. On the other hand General Moly, Inc. (NYSE:GMO) is the least popular one with only 1 bullish hedge fund positions. Qumu Corp (NASDAQ:QUMU) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately QUMU wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); QUMU investors were disappointed as the stock returned -23.3% during the fourth quarter (through 11/22) 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 70 percent of these stocks already outperformed the market in Q4.

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

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