Have Hedge Funds Uncovered A Hidden Gem in Alpha and Omega Semiconductor Ltd (AOSL)?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other successful funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL).

Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) investors should be aware of an increase in enthusiasm from smart money recently. AOSL was in 15 hedge funds’ portfolios at the end of the third quarter of 2016. There were 12 hedge funds in our database with AOSL positions at the end of the previous quarter. At the end of this article we will also compare AOSL to other stocks including Axcelis Technologies Inc (NASDAQ:ACLS), Freshpet Inc (NASDAQ:FRPT), and Heidrick & Struggles International, Inc. (NASDAQ:HSII) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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How are hedge funds trading Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a 25% increase from the second quarter of 2016. By comparison, 10 hedge funds held shares or bullish call options in AOSL heading into this year, which has since increased by 50%. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Jim Simons’ Renaissance Technologies has the number one position in Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), worth close to $15.4 million. Coming in second is Royce & Associates, led by Chuck Royce, holding a $8.6 million position. Some other professional money managers that are bullish encompass David E. Shaw’s D E Shaw, Cliff Asness’ AQR Capital Management, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Consequently, some big names were leading the bulls’ herd. Citadel Investment Group, led by Ken Griffin, assembled the largest position in Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL). Citadel Investment Group had $1.4 million invested in the company at the end of the quarter. Thomas Bailard’s Bailard Inc also made a $0.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Mike Vranos’ Ellington and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s now review hedge fund activity in other stocks similar to Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL). These stocks are Axcelis Technologies Inc (NASDAQ:ACLS), Freshpet Inc (NASDAQ:FRPT), Heidrick & Struggles International, Inc. (NASDAQ:HSII), and Perry Ellis International, Inc. (NASDAQ:PERY). This group of stocks’ market caps are similar to AOSL’s market cap.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $38 million. That figure was $51 million in AOSL’s case. Heidrick & Struggles International, Inc. (NASDAQ:HSII) is the most popular stock in this table. On the other hand Freshpet Inc (NASDAQ:FRPT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None