We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended December 31, so let’s proceed with the discussion of the hedge fund sentiment on Cirrus Logic, Inc. (NASDAQ:CRUS).
Cirrus Logic, Inc. (NASDAQ:CRUS) investors should be aware of a decrease in enthusiasm from smart money in recent months. CRUS was in 25 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 26 hedge funds in our database with CRUS positions at the end of the previous quarter. Our calculations also showed that CRUS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Andrew Sandler of Sandler Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to analyze the fresh hedge fund action encompassing Cirrus Logic, Inc. (NASDAQ:CRUS).
How are hedge funds trading Cirrus Logic, Inc. (NASDAQ:CRUS)?
Heading into the first quarter of 2020, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CRUS over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in Cirrus Logic, Inc. (NASDAQ:CRUS), which was worth $154.2 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $87.4 million worth of shares. Royce & Associates, GLG Partners, and Whale Rock Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Sprott Asset Management allocated the biggest weight to Cirrus Logic, Inc. (NASDAQ:CRUS), around 1.53% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, setting aside 0.83 percent of its 13F equity portfolio to CRUS.
Judging by the fact that Cirrus Logic, Inc. (NASDAQ:CRUS) has experienced a decline in interest from the entirety of the hedge funds we track, we can see that there exists a select few fund managers who sold off their positions entirely heading into Q4. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management said goodbye to the biggest position of all the hedgies followed by Insider Monkey, totaling an estimated $8 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also dumped its stock, about $1.3 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cirrus Logic, Inc. (NASDAQ:CRUS) but similarly valued. These stocks are MAXIMUS, Inc. (NYSE:MMS), Ryman Hospitality Properties, Inc. (NYSE:RHP), Deckers Outdoor Corp (NYSE:DECK), and Shell Midstream Partners LP (NYSE:SHLX). This group of stocks’ market values are similar to CRUS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MMS | 24 | 210310 | -2 |
| RHP | 30 | 457764 | 6 |
| DECK | 43 | 689636 | 14 |
| SHLX | 8 | 38182 | 1 |
| Average | 26.25 | 348973 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $349 million. That figure was $486 million in CRUS’s case. Deckers Outdoor Corp (NYSE:DECK) is the most popular stock in this table. On the other hand Shell Midstream Partners LP (NYSE:SHLX) is the least popular one with only 8 bullish hedge fund positions. Cirrus Logic, Inc. (NASDAQ:CRUS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately CRUS wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CRUS investors were disappointed as the stock returned -27.1% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
