Immersion Corporation (IMMR): Hedge Funds In Wait-and-See Mode

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and a 20% drop in stock prices. Things completely reversed in 2019 and stock indices hit record highs. Recent hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Immersion Corporation (NASDAQ:IMMR) to find out whether it was one of their high conviction long-term ideas.

Is Immersion Corporation (NASDAQ:IMMR) undervalued? Hedge funds are getting more bullish. The number of long hedge fund bets rose by 2 in recent months. Our calculations also showed that IMMR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). IMMR was in 16 hedge funds’ portfolios at the end of the third quarter of 2019. There were 14 hedge funds in our database with IMMR holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
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.

Eric Singer VIEX Capital

Eric Singer of VIEX Capital

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 take a look at the recent hedge fund action encompassing Immersion Corporation (NASDAQ:IMMR).

What have hedge funds been doing with Immersion Corporation (NASDAQ:IMMR)?

At Q3’s end, a total of 16 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in IMMR 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.

The largest stake in Immersion Corporation (NASDAQ:IMMR) was held by Raging Capital Management, which reported holding $37 million worth of stock at the end of September. It was followed by VIEX Capital Advisors with a $24.2 million position. Other investors bullish on the company included Shannon River Fund Management, Rubric Capital Management, and Fondren Management. In terms of the portfolio weights assigned to each position VIEX Capital Advisors allocated the biggest weight to Immersion Corporation (NASDAQ:IMMR), around 14.33% of its 13F portfolio. Raging Capital Management is also relatively very bullish on the stock, earmarking 5.96 percent of its 13F equity portfolio to IMMR.

Now, key money managers have jumped into Immersion Corporation (NASDAQ:IMMR) headfirst. Rubric Capital Management, managed by David Rosen, initiated the largest position in Immersion Corporation (NASDAQ:IMMR). Rubric Capital Management had $5.5 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $1.1 million position during the quarter. The only other fund with a new position in the stock is Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now take a look at hedge fund activity in other stocks similar to Immersion Corporation (NASDAQ:IMMR). We will take a look at Unity Bancorp, Inc. (NASDAQ:UNTY), Stratus Properties Inc. (NASDAQ:STRS), Synchronoss Technologies, Inc. (NASDAQ:SNCR), and Parke Bancorp, Inc. (NASDAQ:PKBK). This group of stocks’ market caps match IMMR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UNTY 4 35275 0
STRS 3 38208 0
SNCR 11 26828 3
PKBK 3 12970 1
Average 5.25 28320 1

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $91 million in IMMR’s case. Synchronoss Technologies, Inc. (NASDAQ:SNCR) is the most popular stock in this table. On the other hand Stratus Properties Inc. (NASDAQ:STRS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Immersion Corporation (NASDAQ:IMMR) is more popular among hedge funds. 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 IMMR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IMMR were disappointed as the stock returned -11.8% during the first two months of the fourth quarter 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.