Do Hedge Funds Love Kopin Corporation (KOPN)?

Based on the fact that hedge funds have collectively underperformed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns of these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Kopin Corporation (NASDAQ:KOPN) was in 6 hedge funds’ portfolios at the end of the third quarter of 2015. Kopin Corporation (NASDAQ:KOPN) shareholders have witnessed a decrease in enthusiasm from smart money of late. There were 7 hedge funds in our database with Kopin Corporation (NASDAQ:KOPN) holdings at the end of the previous quarter. 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 Solazyme Inc (NASDAQ:SZYM), Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN), and EXCO Resources Inc (NYSE:XCO) to gather more data points.

In the eyes of most market participants, hedge funds are viewed as worthless, outdated financial tools of yesteryear. While there are more than 8000 funds in operation at present, our experts look at the crème de la crème of this club, approximately 700 funds. These hedge fund managers manage most of the smart money’s total capital, and by observing their best equity investments, Insider Monkey has identified various investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, we’re going to take a look at the recent action regarding Kopin Corporation (NASDAQ:KOPN).

Hedge fund activity in Kopin Corporation (NASDAQ:KOPN)

At the end of Q3, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 14% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s mutual fund, Royce & Associates, has the largest position in Kopin Corporation (NASDAQ:KOPN), worth close to $6.3 million, amounting to less than 0.1% of its total 13F portfolio. On Royce & Associates’ heels is Millennium Management, managed by Israel Englander, which holds a $2 million position; less than 0.1% of its 13F portfolio is allocated to the company. The remaining members of the smart money that hold long positions contain Renaissance Technologies, Adam Usdan’s Trellus Management Company and Dmitry Balyasny’s Balyasny Asset Management.

Since Kopin Corporation (NASDAQ: KOPN) has experienced a bearish sentiment from hedge fund managers, we can see that there was a specific group of hedge funds who sold off their full holdings by the end of the third quarter. At the top of the heap, David S. Winter and David J. Millstone’s 40 North Management said goodbye to the biggest investment of the “upper crust” of funds monitored by Insider Monkey, worth close to $1.2 million in stock, and Matthew Hulsizer of PEAK6 Capital Management was right behind this move, as the fund dropped about $0.1 million worth of shares. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 fund by the end of the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kopin Corporation (NASDAQ:KOPN) but similarly valued. These stocks are Solazyme Inc (NASDAQ:SZYM), Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN), EXCO Resources Inc (NYSE:XCO), and LSI Industries, Inc. (NASDAQ:LYTS). This group of stock market valuations resembles Kopin Corporation (NASDAQ:KOPN)’s market valuation.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $36 million. That figure was $29 million in Kopin Corporation (NASDAQ:KOPN)’s case. EXCO Resources Inc (NYSE:XCO) is the most popular stock in this table, while Xinyuan Real Estate Co., Ltd. (ADR) (NYSE:XIN) is the least popular one. Even though, Kopin Corporation (NASDAQ: KOPN) is not the least popular stock in this group, hedge fund interest is still below average, which may indicate that the best choice for a long position, among the stocks in this group, is EXCO Resources Inc (NYSE:XCO).