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Is Intermolecular Inc (IMI) Going to Burn These Hedge Funds?

Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Intermolecular Inc (NASDAQ:IMI) changed recently.

Intermolecular Inc (NASDAQ:IMI) was in 6 hedge funds’ portfolios at the end of the third quarter of 2015 and seeing that the stock registered a small increase in popularity during the third quarter, we have decided to take a closer look at what funds are bullish on the stock in this quarter.

However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Gastar Exploration Limited (USA) (NYSEAMEX:GST), Global Defense & National Security Systems Inc. (NASDAQ:GDEF), and GSI Technology, Inc. (NASDAQ:GSIT) to gather more data points.

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If you’d ask most investors, hedge funds are assumed to be unimportant, outdated investment vehicles of the past. While there are over 8000 funds trading at the moment, Our experts choose to focus on the aristocrats of this group, about 700 funds. These investment experts control the majority of the smart money’s total asset base, and by monitoring their first-class picks, Insider Monkey has identified many investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, let’s take a look at the latest action surrounding Intermolecular Inc (NASDAQ:IMI).

What have hedge funds been doing with Intermolecular Inc (NASDAQ:IMI)?

Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 20% from the previous quarter. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Raging Capital Management, managed by William C. Martin, holds the largest position in Intermolecular Inc (NASDAQ:IMI). Raging Capital Management has a $21.5 million position in the stock, comprising 2.8% of its 13F portfolio. The second largest stake is held by Frank Slattery’s Symmetry Peak Management, with a $1.7 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include Jim Simons’ Renaissance Technologies, Chuck Royce’s Royce & Associates, and Ari Zweiman’s 683 Capital Partners.

As industrywide interest jumped, some big names were breaking ground themselves. Millennium Management, managed by Israel Englander, created the most valuable position in Intermolecular Inc (NASDAQ:IMI). Millennium Management had $0 million invested in the company at the end of the quarter.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Intermolecular Inc (NASDAQ:IMI) but similarly valued. These stocks are Gastar Exploration Limited (USA) (NYSEAMEX:GST), STG Group Inc (OTCMKTS:GDEF), and GSI Technology, Inc. (NASDAQ:GSIT). All of these stocks’ market caps resemble IMI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GST 6 2738 -3
GDEF 6 21596 -1
GSIT 5 8911 -1

As you can see these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $11 million, which is lower than the $25 million figure in IMI’s case. Global Defense & National Scrty Sys Inc (NASDAQ:SSRG) is the most popular stock in this table. On the other hand GSI Technology, Inc. (NASDAQ:GSIT) is the least popular one with only 5 bullish hedge fund positions. Intermolecular Inc (NASDAQ:IMI) is not the least popular stock in this group, but hedge fund interest is close to the average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard SSRG might be a better candidate to consider a long position.

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