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. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Immersion Corporation (NASDAQ:IMMR) to find out whether there were any major changes in hedge funds’ views.
Is IMMR a good stock to buy now? Prominent investors were in an optimistic mood. The number of long hedge fund bets went up by 4 recently. Immersion Corporation (NASDAQ:IMMR) was in 21 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 24. 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 for a quick look at the top 5 stocks).
Video: 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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s review the recent hedge fund action regarding Immersion Corporation (NASDAQ:IMMR).
Do Hedge Funds Think IMMR Is A Good Stock To Buy Now?
At Q3’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in IMMR a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Raging Capital Management, managed by William C. Martin, holds the biggest position in Immersion Corporation (NASDAQ:IMMR). Raging Capital Management has a $29 million position in the stock, comprising 28% of its 13F portfolio. Coming in second is VIEX Capital Advisors, managed by Eric Singer, which holds a $20.7 million position; 19.8% of its 13F portfolio is allocated to the stock. Other peers that are bullish include David Rosen’s Rubric Capital Management, George McCabe’s Portolan Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Raging Capital Management allocated the biggest weight to Immersion Corporation (NASDAQ:IMMR), around 28.01% of its 13F portfolio. VIEX Capital Advisors is also relatively very bullish on the stock, earmarking 19.79 percent of its 13F equity portfolio to IMMR.
Consequently, key money managers have jumped into Immersion Corporation (NASDAQ:IMMR) headfirst. Portolan Capital Management, managed by George McCabe, assembled the largest position in Immersion Corporation (NASDAQ:IMMR). Portolan Capital Management had $3 million invested in the company at the end of the quarter. Charles Paquelet’s Skylands Capital also made a $2.1 million investment in the stock during the quarter. The other funds with brand new IMMR positions are Richard Mashaal’s Rima Senvest Management, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Adam Usdan’s Trellus Management Company.
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 Rekor Systems, Inc. (NASDAQ:REKR), Fluent, Inc. (NASDAQ:FLNT), Secoo Holding Limited (NASDAQ:SECO), Protective Insurance Corporation (NASDAQ:PTVCB), Regional Management Corp (NYSE:RM), Gaia, Inc. (NASDAQ:GAIA), and CorMedix Inc. (NYSE:CRMD). This group of stocks’ market valuations match IMMR’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 7.9 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $71 million in IMMR’s case. Gaia, Inc. (NASDAQ:GAIA) is the most popular stock in this table. On the other hand Secoo Holding Limited (NASDAQ:SECO) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Immersion Corporation (NASDAQ:IMMR) is more popular among hedge funds. Our overall hedge fund sentiment score for IMMR is 85.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 30.7% in 2020 through December 14th but still managed to beat the market by 15.8 percentage points. Hedge funds were also right about betting on IMMR as the stock returned 22.7% since the end of September (through 12/14) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.