The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31st. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Power Integrations Inc (NASDAQ:POWI).
Power Integrations Inc (NASDAQ:POWI) has experienced an increase in support from the world’s most elite money managers in recent months. Power Integrations Inc (NASDAQ:POWI) was in 18 hedge funds’ portfolios at the end of March. The all time high for this statistic is 21. There were 17 hedge funds in our database with POWI positions at the end of the fourth quarter. Our calculations also showed that POWI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
David Harding of Winton Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a look at the key hedge fund action regarding Power Integrations Inc (NASDAQ:POWI).
Do Hedge Funds Think POWI Is A Good Stock To Buy Now?
At Q1’s end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the fourth quarter of 2020. By comparison, 21 hedge funds held shares or bullish call options in POWI a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
The largest stake in Power Integrations Inc (NASDAQ:POWI) was held by Polar Capital, which reported holding $75.6 million worth of stock at the end of December. It was followed by Millennium Management with a $14.9 million position. Other investors bullish on the company included Cavalry Asset Management, Totem Point Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Totem Point Management allocated the biggest weight to Power Integrations Inc (NASDAQ:POWI), around 5.09% of its 13F portfolio. Cavalry Asset Management is also relatively very bullish on the stock, setting aside 1.16 percent of its 13F equity portfolio to POWI.
Now, some big names were breaking ground themselves. Cavalry Asset Management, managed by John Hurley, assembled the largest position in Power Integrations Inc (NASDAQ:POWI). Cavalry Asset Management had $12.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $7.2 million position during the quarter. The other funds with brand new POWI positions are Greg Eisner’s Engineers Gate Manager, Jinghua Yan’s TwinBeech Capital, and Matthew L Pinz’s Pinz Capital.
Let’s check out hedge fund activity in other stocks similar to Power Integrations Inc (NASDAQ:POWI). We will take a look at Signify Health, Inc. (NYSE:SGFY), STAAR Surgical Company (NASDAQ:STAA), Lazard Ltd (NYSE:LAZ), Rackspace Technology, Inc. (NASDAQ:RXT), Spirit Realty Capital Inc (NYSE:SRC), American Eagle Outfitters Inc. (NYSE:AEO), and AppFolio Inc (NASDAQ:APPF). All of these stocks’ market caps are closest to POWI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SGFY | 28 | 189217 | 28 |
| STAA | 16 | 1291146 | -1 |
| LAZ | 19 | 770857 | -1 |
| RXT | 11 | 125806 | -3 |
| SRC | 18 | 166994 | 1 |
| AEO | 43 | 948063 | 4 |
| APPF | 12 | 394366 | -7 |
| Average | 21 | 555207 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $555 million. That figure was $136 million in POWI’s case. American Eagle Outfitters Inc. (NYSE:AEO) is the most popular stock in this table. On the other hand Rackspace Technology, Inc. (NASDAQ:RXT) is the least popular one with only 11 bullish hedge fund positions. Power Integrations Inc (NASDAQ:POWI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for POWI is 42.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately POWI wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); POWI investors were disappointed as the stock returned 3.8% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Power Integrations Inc (NASDAQ:POWI)
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Disclosure: None. This article was originally published at Insider Monkey.
