Why Digimarc Corp (DMRC), Turtle Beach Corp (HEAR) & Green Dot Corporation (GDOT) Surged Last Week

Many small-cap stocks were among the biggest gainers of the week that ended on June 26. Notably, the digital watermarking technology provider, Digimarc Corp (NASDAQ:DMRC), audio technology company, Turtle Beach Corp (NASDAQ:HEAR), and the prepaid MasterCard and Visa card issuer, Green Dot Corporation (NYSE:GDOT) all jumped by more than 30% over the last five days. Why did these stocks surge? Were the hedge fund managers right about these stocks? Let’s take a look at the action surrounding these white-hot stocks.

We don’t just track the latest moves of hedge funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research which showed that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests, and easily beating the most popular large-cap picks of funds, which nonetheless get the majority of their collective capital. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic only the very best ideas of the best fund managers on your own? Since the beginning of forward testing in August 2012, the Insider Monkey small-cap strategy has outperformed the market every year, returning 145%, nearly 2.5 times greater returns than the S&P 500 during the same period (see more details). Tracking insider activity meanwhile is just as important, as insiders know that extra information about the stock well before portfolio managers and analysts do.

Digimarc Corp (NASDAQ:DMRC)’s stock soared in the last five days following a positive comment from Wal-Mart Stores, Inc. (NYSE:WMT) CEO, Doug McMillon about the company’s digital watermark technology. The stock jumped by around 14% on Tuesday soon after the news broke about the post from the Walmart CEO. The stock gained another 12% on Wednesday and ended the week at $43.19 per share, up by more than 34% for the week. McMillon indicated that they might adapt Digimarc’s digital watermark technology in order to reduce the long queues at Wal-Mart Stores, Inc. (NYSE:WMT)’s checkout counters. The invisible watermark technology from Digimarc makes it easy to scan items, as the watermark is spread all around the product, thereby saving the time needed to search for the bar codes.

At the end of the first quarter, a total of four of the hedge funds tracked by Insider Monkey held long positions in Digimarc Corp (NASDAQ:DMRC), a dip of 20% from one quarter earlier. There was also a 24% dip in aggregate capital investment to $16.5 million by the hedge funds in this stock, compared to the end of 2014. The stock had dropped around 19% in the first quarter. So hedge funds were not bullish on this stock heading into the second quarter. Richard Mashaal‘s Rima Senvest Management holds the largest position in Digimarc Corp with 625,000 shares valued at $13.7 million. From an insiders perspective, there were no insider purchases of the stock this year, though there was one insider selling the stock: Chairman and CEO of Digimarc Corp (NASDAQ:DMRC), Bruce Davis has sold around 24,000 shares in multiple transactions this year.

Turtle Beach Corp (NASDAQ:HEAR) skyrocketed on Wednesday as the stock went up by around 40% on that day. The audio technology company made an announcement about a deal with Amplified Resource Group, LLC on Tuesday. According to this deal, ARG will be able to add Turtle Beach Corp (NASDAQ:HEAR)’s HyperSound Clear to its product portfolio for the hearing-impaired healthcare industry. HyperSound Clear technology can help direct 3D crisp sound to individuals with hearing loss. Following this announcement on Tuesday, the stock gained around 40% on Wednesday, but eventually dropped around 3% and 9% on Thursday and Friday respectively, ending the week with a 30.69% gain to $2.47 per share. Average Analysts’ price target on Turtle Beach Corp (NASDAQ:HEAR) is at $4.42 per share, suggesting considerable remaining upside still.

At the end of the first quarter, a total of five of the hedge funds held long positions in Turtle Beach Corp (NASDAQ:HEAR), a drop of 29% from the end of the fourth quarter. In addition to this, there was also a drop of 57% in aggregate capital investment by hedge funds in the stock during the quarter. However, the stock had lost 40% of its value in the first quarter, contributing to much of that capital loss. Invicta Capital Management led by Gregory Weaver holds the largest position in Turtle Beach Corp in our database, of 1.03 million shares valued at $1.9 million at the end of first quarter. There have been no insider sales or purchase of this stock so far this year.

Green Dot Corporation (NYSE:GDOT)’s stock spiked by more than 30% on Tuesday, which was attributed to a couple of reasons. Firstly, a renewed 5-year agreement with Wal-Mart Stores, Inc. (NYSE:WMT) for distributing its suite of prepaid cards, and secondly, the company announced a repurchase plan of $150 million for its shareholders. Green Dot Corporation (NYSE:GDOT)’s stock dropped around 6% from its high on Tuesday and ended the week at $19.95 per share, up by 30.82%. Shares have blown past analysts’ mean price target for the stock of $20.37 per share.

Hedge fund managers were turning less bullish on this stock during the first quarter. The number of long hedge fund bets retreated by six, as 19 hedge funds held long positions in the stock at the end of the first quarter. There were 25 hedge funds with GDOT holdings at the end of the previous quarter. Aggregate capital investment by hedge funds also plunged by 50% by the end of the first quarter, with the stock having dropped 22% of its value in the first quarter. This indicates that hedge fund managers were rather bearish on this stock. Joseph Jolson‘s Harvest Capital Strategies held the largest position in the stock with 2.2 million shares valued at $35.3 million at the end of first quarter. But insiders showed some positive signs on the stock leading up to the burst as Chairman and CEO Steven Streit purchased around 206,800 shares of the company in February. There was also an insider who sold shares, as COO Kuan Archer sold around 9,500 shares of the company in January. Hedge funds were bearish on the stock, but insider activity indicated bullish behavior.

Overall, hedge funds were not very bullish on Digimarc Corp (NASDAQ:DMRC), Turtle Beach Corp (NASDAQ:HEAR), or Green Dot Corporation (NYSE:GDOT), and the surge that these stocks experienced in the last week appears to have caught most of them off-guard.

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