Becker Drapkin Management, founded by Matthew Drapkin and Steven R. Becker, has recently disclosed in a 13D filing with the Securities and Exchange Commission that it has unloaded 883,611 shares of EMCORE Corporation (NASDAQ:EMKR). Following the transactions, the hedge fund currently owns 2.31 million shares in the provider of semiconductor-based products, translating into a 9.0% ownership stake. Becker Drapkin has been holding a position in EMCORE since the end of 2013, when the fund indicated in a 13D filing that the shares of the company were undervalued and represented an attractive investment opportunity at the time.
Becker Drapkin Management is a value-oriented activist hedge fund established by Matthew Drapkin and Steven R. Becker in 2004. The investment firm mainly invests in deep value stocks of small-cap companies, with market capitalizations normally below $500 million. Becker Drapkin Management, formerly known as SRB Management LP, primarily employs fundamental analysis when seeking investment opportunities in the U.S. equity markets. The Texas-based hedge fund has diversified its holdings among the following sectors: 59% in the information technology sector, 16% in the utilities and telecommunications sector, and 12% and 7% in the consumer discretionary and industrials sectors, respectively. According to its latest 13F filing, Becker Drapkin Management oversees a public equity portfolio worth $179.69 million as of March 31, 2015. We recently profiled Becker Drapkin’s top picks, which included EMCORE, in addition to Par Petroleum Corporation (NYSEMKT:PARR), and Comverse Inc (NASDAQ:CNSI).
Following activist funds like Becker Drapkin Management is important because it is a very specific and focused strategy in which the investor doesn’t have to wait for catalysts to realize gains in the holding. A fund like Becker Drapkin can simply create its own catalysts by pushing for them through negotiations with the company’s management and directors. In recent years, the average returns of activists’ hedge funds has been much higher than the returns of an average hedge fund. Furthermore, we believe do-it-yourself investors have an advantage over activist hedge fund investors because they don’t have to pay 2% of their assets and 20% of their gains every year to compensate hedge fund managers. We have found through extensive research that the top small-cap picks of hedge funds are also capable of generating high returns and built a system around this premise. In the 35 months since our small-cap strategy was launched it has returned over 123% and beaten the S&P 500 ETF (SPY) by more than 65 percentage points (read more details).
EMCORE Corporation (NASDAQ:EMKR) is a leading provider of compound semiconductor-based products for the broadband, fiber optics, space, and solar power markets. The company mainly operates in two segments: Fiber Optics and Photovoltaics. The shares of EMCORE have gained over 37% since the beginning of the current year, so it is no surprise that Becker Drapkin Management decided to take some profits off the table. To be more detailed, the activist hedge fund acquired a 1.90 million-share stake during the last months of 2013 at prices in the range of $4.29 to $4.75. Meanwhile, the firm has recently sold the aforementioned 883,611 share-stake in the company at prices in the range of $6.55-$7.40, so Becker Drapkin enjoyed returns of at least 38% on the transaction.