Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Quantum Corp (NYSE:QTM).
Hedge fund interest towards Quantum Corp (NYSE:QTM) shares was flat at the end of the last quarter. This is usually a negative indicator. 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 SeaChange International (NASDAQ:SEAC), Advent/Claymore Enhanced Growth & Income (NYSE:LCM), and GSV Capital Corp (NASDAQ:GSVC) to gather more data points.
Follow Quantum Corp (NASDAQ:QMCO)
Follow Quantum Corp (NASDAQ:QMCO)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Keeping this in mind, let’s review the key action encompassing Quantum Corp (NYSE:QTM).
What have hedge funds been doing with Quantum Corp (NYSE:QTM)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, unchanged from the end of June. On the other hand, there were a total of 14 hedge funds with a bullish position in QTM at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to Insider Monkey’s hedge fund database, Jeffrey Smith’s Starboard Value LP has the biggest position in Quantum Corp (NYSE:QTM), worth close to $14 million, amounting to 0.4% of its total 13F portfolio. The second largest stake is held by Private Capital Management, led by Gregg J. Powers, which disclosed a $10.6 million position; 1.6% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish consist of George Soros’ Soros Fund Management, Jim Simons’ Renaissance Technologies and Kelly Cardwell’s Central Square Management. We’d like to point out an extraordinary observation. Three of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
We already know that not all hedge funds are bullish on the stock and some hedge funds actually cut their positions entirely. It’s worth mentioning that Benjamin A. Smith’s Laurion Capital Management cut the biggest investment of all the investors studied by Insider Monkey, valued at close to $0.3 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also said goodbye to its stock, about $0.1 million worth.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Quantum Corp (NYSE:QTM) but similarly valued. We will take a look at SeaChange International (NASDAQ:SEAC), Advent/Claymore Enhanced Growth & Income (NYSE:LCM), GSV Capital Corp (NASDAQ:GSVC), and ProQR Therapeutics NV (NASDAQ:PRQR). This group of stocks’ market valuations are similar to QTM’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SEAC | 9 | 27512 | -1 |
| LCM | 6 | 26215 | 2 |
| GSVC | 5 | 779 | 1 |
| PRQR | 6 | 28058 | -1 |
As you can see these stocks had an average of seven funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $43 million in QTM’s case. SeaChange International (NASDAQ:SEAC) is the most popular stock in this table. On the other hand GSV Capital Corp (NASDAQ:GSVC) is the least popular one with only five bullish hedge fund positions. Compared to these stocks Quantum Corp (NYSE:QTM) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: none
