More Hedge Funds Like Vimicro International Corporation (ADR) (VIMC)

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Vimicro International Corporation (ADR) (NASDAQ:VIMC) from the perspective of those elite funds.

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Vimicro International Corporation (ADR) (NASDAQ:VIMC) has experienced an increase in enthusiasm from smart money of late, jumping by 150%. At the end of this article, we will also compare VIMC to other stocks including Build-A-Bear Workshop, Inc (NYSE:BBW), Ecopetrol S.A. (ADR) (NYSE:EC), and EZCORP Inc (NASDAQ:EZPW) to get a better sense of its popularity.

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In the 21st century investor’s toolkit there are many tools investors use to evaluate publicly traded companies. Some of the most innovative tools are hedge fund and insider trading sentiment. Experts at Insider Monkey, a website specializing in hedge funds, have shown that, historically, those who follow the top picks of the elite investment managers can trounce their index-focused peers by a superb margin (see the details here).

Now, let’s take a look at the fresh action surrounding Vimicro International Corporation (ADR) (NASDAQ:VIMC).

What have hedge funds been doing with Vimicro International Corporation (ADR) (NASDAQ:VIMC)?

At the end of the third quarter, a total of five of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 150% from the second quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully.

According to Insider Monkey’s hedge fund database, Matthew Hulsizer’s PEAK6 Capital Management has the most valuable position in Vimicro International Corporation (ADR) (NASDAQ:VIMC), worth close to $4.7 million, corresponding to less than 0.1% of its total 13F portfolio. Sitting in second is Michael Platt and William Reeves of BlueCrest Capital Mgmt., with a $1.8 million position; 0.1% of its 13F portfolio is allocated to the company. Other peers that hold long positions encompass Ken Griffin’s Citadel Investment Group, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Consequently, key money managers were breaking ground themselves. PEAK6 Capital Management created the most valuable position in Vimicro International Corporation (ADR) (NASDAQ:VIMC). PEAK6 Capital Management had $4.7 million invested in the company at the end of the quarter. The other funds with new positions in the stock are Marshall Wace LLP, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s go over hedge fund activity in other stocks similar to Vimicro International Corporation (ADR) (NASDAQ:VIMC). These stocks are Build-A-Bear Workshop, Inc (NYSE:BBW), Ecopetrol S.A. (ADR) (NYSE:EC), EZCORP Inc (NASDAQ:EZPW), and Flexion Therapeutics Inc (NASDAQ:FLXN). This group of stocks’ market valuations match VIMC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BBW 15 54221 -1
EC 6 36169 2
EZPW 17 68103 -4
FLXN 10 36547 2

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $49 million, while it was just $9.2 million for Vimicro. EZCORP Inc (NASDAQ:EZPW) is the most popular stock in this table. On the other hand, Ecopetrol S.A. (ADR) (NYSE:EC) is the least popular one with only six bullish hedge fund positions. Compared to these stocks Vimicro International Corporation (ADR) (NASDAQ:VIMC) is even less popular than EC, despite the rising interest. Considering that hedge funds aren’t fond of this stock, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.