We can judge whether eGain Communications 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 when we factor in known risk factors.
Is eGain Communications Corporation (NASDAQ:EGAN) going to take off soon? The best stock pickers are selling. The number of bullish hedge fund positions decreased by 2 in recent months. 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 below for Q2 rankings). EGAN was in 10 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with EGAN holdings at the end of the previous quarter.
Video: Click the image to 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’ 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.
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s check out the fresh hedge fund action surrounding eGain Communications Corporation (NASDAQ:EGAN).
What does smart money think about eGain Communications Corporation (NASDAQ:EGAN)?
Heading into the fourth quarter of 2019, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the second quarter of 2019. By comparison, 10 hedge funds held shares or bullish call options in EGAN a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of eGain Communications Corporation (NASDAQ:EGAN), with a stake worth $11.9 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $7 million. Venator Capital Management, Millennium Management, and D E Shaw 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 Venator Capital Management allocated the biggest weight to eGain Communications Corporation (NASDAQ:EGAN), around 2.75% of its 13F portfolio. Vertex One Asset Management is also relatively very bullish on the stock, earmarking 0.06 percent of its 13F equity portfolio to EGAN.
Because eGain Communications Corporation (NASDAQ:EGAN) has witnessed a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of fund managers that decided to sell off their positions entirely heading into Q4. Interestingly, Brian Ashford-Russell and Tim Woolley’s Polar Capital said goodbye to the largest stake of the 750 funds watched by Insider Monkey, valued at close to $2 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace, also dumped its stock, about $0.9 million worth. These moves are important to note, as total hedge fund interest dropped by 2 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to eGain Communications Corporation (NASDAQ:EGAN). These stocks are FTS International, Inc. (NYSE:FTSI), Accuray Incorporated (NASDAQ:ARAY), ACNB Corporation (NASDAQ:ACNB), and FVCBankcorp, Inc. (NASDAQ:FVCB). This group of stocks’ market valuations match EGAN’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $28 million in EGAN’s case. Accuray Incorporated (NASDAQ:ARAY) is the most popular stock in this table. On the other hand ACNB Corporation (NASDAQ:ACNB) is the least popular one with only 1 bullish hedge fund positions. eGain Communications Corporation (NASDAQ:EGAN) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 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 -4.7% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.