The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Oclaro, Inc. (NASDAQ:OCLR), and what that likely means for the prospects of the company and its stock.
Oclaro, Inc. (NASDAQ:OCLR) has experienced an increase in support from the world’s most elite money managers recently. Oclaro, Inc. (NASDAQ:OCLR) was in 15 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with Oclaro, Inc. (NASDAQ:OCLR) positions at the end of the previous quarter. At the end of this article we will also compare OCLR to other stocks including Tucows Inc. (USA) (NASDAQ:TCX), Westmoreland Coal Company (NASDAQ:WLB), and Territorial Bancorp Inc (NASDAQ:TBNK) to get a better sense of its popularity.
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In the eyes of most shareholders, hedge funds are viewed as underperforming, old financial tools of yesteryear. While there are more than 8,000 funds trading at present, Hedge fund experts at Insider Monkey hone in on the elite of this club, approximately 700 funds. These investment experts control most of the smart money’s total capital, and by keeping track of their finest investments, Insider Monkey has spotted various investment strategies that have historically beaten 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 its back tests.
With all of this in mind, we’re going to review the fresh action encompassing Oclaro, Inc. (NASDAQ:OCLR).
What have hedge funds been doing with Oclaro, Inc. (NASDAQ:OCLR)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, up by 15% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their stakes significantly.
Of the funds tracked by Insider Monkey, Anand Parekh’s Alyeska Investment Group has the largest position in Oclaro, Inc. (NASDAQ:OCLR), worth close to $9.7 million, amounting to 0.1% of its total 13F portfolio. On Alyeska Investment Group’s heels is Alex Sacerdote of Whale Rock Capital Management, with an $8.8 million position; 0.9% of its 13F portfolio is allocated to the company. Other hedge funds that are bullish contain Don Morgan’s Brigade Capital, Chuck Royce’s Royce & Associates, and Jim Simons’ Renaissance Technologies.
As one would reasonably expect, some big names were leading the bulls’ herd. Whale Rock Capital Management initiated the biggest position in Oclaro, Inc. (NASDAQ:OCLR). Whale Rock Capital Management had $8.8 million invested in the company at the end of the quarter. Cliff Asness’ AQR Capital Management also initiated a $0.2 million position during the quarter.
Let’s check out hedge fund activity in other stocks similar to Oclaro, Inc. (NASDAQ:OCLR). We will take a look at Tucows Inc. (USA) (NASDAQ:TCX), Westmoreland Coal Company (NASDAQ:WLB), Territorial Bancorp Inc (NASDAQ:TBNK), and Armada Hoffler Properties Inc (NYSE:AHH). This group of stocks’ market caps are similar to Oclaro, Inc. (NASDAQ:OCLR)’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| TCX | 11 | 41369 | 2 |
| WLB | 19 | 95715 | -2 |
| TBNK | 8 | 21595 | 1 |
| AHH | 12 | 24000 | 1 |
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $46 million, slightly ahead of the $40 million invested in Oclaro. Westmoreland Coal Company (NASDAQ:WLB) is the most popular stock in this table. On the other hand Territorial Bancorp Inc (NASDAQ:TBNK) is the least popular one with only eight bullish hedge fund positions. Oclaro, Inc. (NASDAQ:OCLR) 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, Westmoreland Coal Company (NASDAQ:WLB) might be a better candidate to consider a long position.
