Is Silicon Laboratories (NASDAQ:SLAB) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from industry insiders. They sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
Silicon Laboratories (NASDAQ:SLAB) was in 14 hedge funds’ portfolios at the end of the third quarter of 2018. SLAB has experienced an increase in support from the world’s most elite money managers recently. There were 13 hedge funds in our database with SLAB positions at the end of the previous quarter. Our calculations also showed that SLAB isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
Let’s take a look at the fresh hedge fund action surrounding Silicon Laboratories (NASDAQ:SLAB).
How are hedge funds trading Silicon Laboratories (NASDAQ:SLAB)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from one quarter earlier. By comparison, 20 hedge funds held shares or bullish call options in SLAB heading into this year. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Silicon Laboratories (NASDAQ:SLAB) was held by Carlson Capital, which reported holding $17.5 million worth of stock at the end of September. It was followed by AQR Capital Management with a $17.2 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and D E Shaw.
As one would reasonably expect, key money managers have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, established the biggest position in Silicon Laboratories (NASDAQ:SLAB). Laurion Capital Management had $0.4 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Paul Tudor Jones’s Tudor Investment Corp.
Let’s check out hedge fund activity in other stocks similar to Silicon Laboratories (NASDAQ:SLAB). We will take a look at Blackstone Mortgage Trust Inc (NYSE:BXMT), TriNet Group Inc (NYSE:TNET), First Industrial Realty Trust, Inc. (NYSE:FR), and Aaron’s, Inc. (NYSE:AAN). All of these stocks’ market caps are closest to SLAB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BXMT | 14 | 154926 | 4 |
| TNET | 21 | 586694 | 3 |
| FR | 16 | 301170 | 4 |
| AAN | 18 | 242399 | -3 |
| Average | 17.25 | 321297 | 2 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $321 million. That figure was $73 million in SLAB’s case. TriNet Group Inc (NYSE:TNET) is the most popular stock in this table. On the other hand Blackstone Mortgage Trust Inc (NYSE:BXMT) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Silicon Laboratories (NASDAQ:SLAB) is even less popular than BXMT. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
Disclosure: None. This article was originally published at Insider Monkey.
