Is Quantum Corp (QTM) Going to Burn These Hedge Funds?

While the market driven by short-term sentiment influenced by uncertainty regarding the future of the interest rate environment in the US, the low commodity prices and the economic turmoil in China, many smart money investors are keeping their optimism regarding the current bull run, while still hedging many of their long positions. However, as we know, big investors usually buy stocks with strong fundamentals, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Quantum Corp (NYSE:QTM).

Quantum Corp (NYSE:QTM) has experienced a decrease in support from the world’s most elite money managers lately. 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 Ultra Clean Holdings Inc (NASDAQ:UCTT), Sears Hometown and Outlet Stores Inc (NASDAQ:SHOS), and Geospace Technologies Corp (NASDAQ:GEOS) to gather more data points.

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In the 21st century investor’s toolkit there are plenty of metrics stock traders use to assess stocks. A duo of the less known metrics are hedge fund and insider trading interest. Our experts have shown that, historically, those who follow the top picks of the elite hedge fund managers can outpace the market by a superb margin (see the details here).

Now, let’s check out the fresh action surrounding Quantum Corp (NYSE:QTM).

What does the smart money think about Quantum Corp (NYSE:QTM)?

Heading into Q4, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -29% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Jeffrey Smith’s Starboard Value LP has the number one position in Quantum Corp (NYSE:QTM), worth close to $17.9 million, amounting to 0.4% of its total 13F portfolio. Sitting at the No. 2 spot is Private Capital Management, led by Gregg J. Powers, holding an $11.6 million position; 1.4% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors with similar optimism comprise Peter S. Park’s Park West Asset Management, Paul Orlin and Alex Porter’s Amici Capital and Jim Simons’s Renaissance Technologies.

Because Quantum Corp (NYSE:QTM) has witnessed bearish sentiment from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of money managers that elected to cut their full holdings last quarter. At the top of the heap, Brett Hendrickson’s Nokomis Capital sold off the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $7.5 million in stock, and Robert Henry Lynch’s Aristeia Capital was right behind this move, as the fund said goodbye to about $6.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 7 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Quantum Corp (NYSE:QTM). These stocks are Ultra Clean Holdings Inc (NASDAQ:UCTT), Sears Hometown and Outlet Stores Inc (NASDAQ:SHOS), Geospace Technologies Corp (NASDAQ:GEOS), and Evolution Petroleum Corporation (NYSEAMEX:EPM). This group of stocks’ market values resemble QTM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UCTT 18 26615 8
SHOS 16 78110 0
GEOS 5 17620 -1
EPM 5 9828 0

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $33 million, versus $51 million in QTM’s case. Ultra Clean Holdings Inc (NASDAQ:UCTT) is the most popular stock in this table. On the other hand Geospace Technologies Corp (NASDAQ:GEOS) is the least popular one with only 5 bullish hedge fund positions. Quantum Corp (NYSE:QTM) 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. In this regard UCTT might be a better candidate to consider a long position.