Are Investors Right To Be Bullish On Deckers Outdoor Corp (DECK), Tower Semiconductor Ltd. (TSEM), More?

Hedge funds had a pretty solid run for much of this year, generating positive returns for seven or eight consecutive months (depending on the source) before that streak came to an end in October. The third-quarter was a particularly strong one for the industry, as evidenced by our own data. 659 funds in our system which filed for the June 30 13F reporting period held long positions in at least 5 non-micro-cap stocks, and those funds’ long bets posted 8.3% gains in the third-quarter based on the size of their positions on June 30. That easily bested the performance of S&P 500 ETFs, which returned only 3.3% for the period. Where hedge funds tend to falter is on the other positions in their portfolios (options plays, bonds, etc.), which are there to limit downside risk, but also limit upside potential. That’s why we recommend investors consider hedge funds’ top long bets and share them with readers throughout the year.

Rima Senvest Management is a fund managed by Richard Mashaal, which primarily invests in financial services, technology, resources, and industrial companies. On June 30, its equity portfolio was worth around $1.22 billion. The fund’s 15 long positions in companies that were worth $1 billion or more on June 30 had weighted average returns amounting to 16.44% in the third quarter. These positive returns are surely interesting for examining, which is why in this article we’ll take a closer look at four of the fund’s top picks, including Deckers Outdoor Corp (NASDAQ:DECK),  Tower Semiconductor Ltd. (USA) (NASDAQ:TSEM), Depomed Inc (NASDAQ:DEPO), and Northstar Realty Finance Corp. (NYSE:NRF).

With all this in mind, let’s see how those four picks performed in the third quarter.

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Let’s start with Deckers Outdoor Corp (NASDAQ:DECK), a company that designs footwear and accessories for both outdoor and everyday type of activities. During the June quarter, RIMA Senvest Management increased its stake in the company by 2%, and then in the third quarter lowered it by 8%, reporting a position that counted 1.40 million shares on September 30, and was worth $83.57 million. Meanwhile, during the third quarter, the stock delivered a return of 3.5%.

At Q2’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a 29% fall from the previous quarter. One of the largest stakes in the company at the end of June was reported by Red Mountain Capital with a $60.7 million position. Other investors bullish on the company included Royce & Associates, Gotham Asset Management, and AQR Capital Management.

During the June quarter, RIMA Senvest Management boosted its position in Tower Semiconductor Ltd. (USA) (NASDAQ:TSEM) by 6%, which turned out to be a good move, since the company’s shares advanced by 22% in the next three months. By the end of the third quarter, the fund increased its stake by additional 6%, reporting a position that was valued at $114.65 million, amassing 8.22% of the value of its portfolio.

At the end of the second quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, down by 11% from the first quarter of 2016. One of the biggest investors in Tower Semiconductor Ltd. (USA) (NASDAQ:TSEM) was Harvest Capital Strategies with a $14.9 million position. Other investors bullish on the company included Alkeon Capital Management, McKinley Capital Management, and Marshall Wace LLP.

We’ll check out two more of the fund’s stock picks on the next page.

RIMA Senvest Management first lowered its stake in Depomed Inc (NASDAQ:DEPO) during the June quarter, by 15%, and then further in the third quarter, by 1%. On September 30, the fund held 4.13 million shares, which were valued at $103.10 million. Seeing that the stock returned 27.3% during the third quarter, we can only presume that the fund jumped the gun on selling out of some of its position in Q2.

Heading into the third quarter of 2016, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, same as in the previous quarter. According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Starboard Value LP, managed by Jeffrey Smith, held the number one position in Depomed Inc (NASDAQ:DEPO) at the end of June. Starboard Value LP had a $118 million position in the stock, comprising 4.2% of its 13F portfolio. Remaining hedge funds and institutional investors that were bullish encompassed Mitchell Blutt’s Consonance Capital Management, Curtis Schenker and Craig Effron’s Scoggin, and Joseph Edelman’s Perceptive Advisors.

The last stock we’re going to look at in this article is a real estate company, Northstar Realty Finance Corp. (NYSE:NRF). In the June quarter, RIMA Senvest Management lowered its position in the company by 1%, then by another 4% more in the following quarter. On September 30, its stake counted 5.81 million shares, which were worth $76.48 million and amassed 5.48% of its equity portfolio’s value. During the third quarter, the stock returned a solid 18.7%.

Heading into the third quarter of 2016, 32 of the hedge funds in our system were long this stock, a 16% dip from the first quarter of 2016. One of the biggest positions in the company was reported by Abrams Capital Management, which amassed $37.5 million worth of shares as of June 30. Moreover, Bloom Tree Partners, EJF Capital, and North Run Capital were also shareholders of Northstar Realty Finance Corp. (NYSE:NRF).

Disclosure: None