Is EMCORE Corporation (EMKR) A Good Stock To Buy?

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards EMCORE Corporation (NASDAQ:EMKR).

EMCORE Corporation (NASDAQ:EMKR) was in 13 hedge funds’ portfolios at the end of September. EMKR has seen an increase in hedge fund sentiment of late. There were 11 hedge funds in our database with EMKR holdings at the end of the previous quarter. Our calculations also showed that EMKR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most shareholders, hedge funds are assumed to be worthless, old financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, Our researchers look at the masters of this group, approximately 750 funds. It is estimated that this group of investors handle most of all hedge funds’ total asset base, and by keeping track of their top picks, Insider Monkey has discovered a few investment strategies that have historically surpassed the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

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. We’re going to take a look at the key hedge fund action regarding EMCORE Corporation (NASDAQ:EMKR).

How have hedgies been trading EMCORE Corporation (NASDAQ:EMKR)?

Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in EMKR over the last 17 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is EMKR A Good Stock To Buy?

Among these funds, VIEX Capital Advisors held the most valuable stake in EMCORE Corporation (NASDAQ:EMKR), which was worth $7.6 million at the end of the third quarter. On the second spot was Solas Capital Management which amassed $5.8 million worth of shares. Cannell Capital, Renaissance Technologies, and Becker Drapkin Management 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 Solas Capital Management allocated the biggest weight to EMCORE Corporation (NASDAQ:EMKR), around 6.05% of its 13F portfolio. Becker Drapkin Management is also relatively very bullish on the stock, dishing out 4.78 percent of its 13F equity portfolio to EMKR.

As one would reasonably expect, key hedge funds have jumped into EMCORE Corporation (NASDAQ:EMKR) headfirst. Cannell Capital, managed by J. Carlo Cannell, assembled the largest position in EMCORE Corporation (NASDAQ:EMKR). Cannell Capital had $4.9 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also initiated a $0.4 million position during the quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as EMCORE Corporation (NASDAQ:EMKR) but similarly valued. These stocks are Mediwound Ltd (NASDAQ:MDWD), United-Guardian, Inc. (NASDAQ:UG), RiceBran Technologies (NASDAQ:RIBT), and Arbutus Biopharma Corp (NASDAQ:ABUS). This group of stocks’ market caps match EMKR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MDWD 1 918 0
UG 2 7909 0
RIBT 4 1516 0
ABUS 7 2516 0
Average 3.5 3215 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 3.5 hedge funds with bullish positions and the average amount invested in these stocks was $3 million. That figure was $34 million in EMKR’s case. Arbutus Biopharma Corp (NASDAQ:ABUS) is the most popular stock in this table. On the other hand Mediwound Ltd (NASDAQ:MDWD) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks EMCORE Corporation (NASDAQ:EMKR) 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 EMKR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EMKR were disappointed as the stock returned 2.9% 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.