Hedge Fund Ownership of Intersil Corp (ISIL) Doubles in Q3: Have They Found A Winner?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Intersil Corp (NASDAQ:ISIL) has experienced an increase in hedge fund interest in recent months. ISIL was in 30 hedge funds’ portfolios at the end of September. There were 14 hedge funds in our database with ISIL holdings at the end of the previous quarter.  At the end of this article we will also compare ISIL to other stocks including Penumbra Inc (NYSE:PEN), Office Depot Inc (NYSE:ODP), and Esterline Technologies Corporation (NYSE:ESL) 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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What does the smart money think about Intersil Corp (NASDAQ:ISIL)?

Heading into the fourth quarter of 2016, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a gain of 114% from the second quarter of 2016, with the surge coming after three quarters of relatively flat sentiment. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Alec Litowitz and Ross Laser’s Magnetar Capital has the biggest position in Intersil Corp (NASDAQ:ISIL), worth close to $86.6 million, amounting to 1.3% of its total 13F portfolio. Coming in second is TIG Advisors, managed by Carl Tiedemann and Michael Tiedemann, which holds a $74.9 million position; the fund has 6.6% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions comprise Thomas Steyer’s Farallon Capital, Cliff Asness’ AQR Capital Management, and Robert Emil Zoellner’s Alpine Associates.

Now, specific money managers were breaking ground themselves. Magnetar Capital created the most valuable position in Intersil Corp (NASDAQ:ISIL), while TIG Advisors’ position was also a new one. The other funds with brand new ISIL positions are Farallon Capital, Alpine Associates, and Matthew Halbower’s Pentwater Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Intersil Corp (NASDAQ:ISIL) but similarly valued. We will take a look at Penumbra Inc (NYSE:PEN), Office Depot Inc (NYSE:ODP), Esterline Technologies Corporation (NYSE:ESL), and Mueller Industries, Inc. (NYSE:MLI). This group of stocks’ market valuations are closest to ISIL’s market valuation.

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 $268 million. That figure was $319 million in ISIL’s case. Office Depot Inc (NYSE:ODP) is the most popular stock in this table. On the other hand Mueller Industries, Inc. (NYSE:MLI) is the least popular one with only 15 bullish hedge fund positions. Intersil Corp (NASDAQ:ISIL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but given that the surge was due to the company becoming a merger arb play, we’d prefer to follow hedge fund sentiment into other stocks. In this regard ODP might be a better candidate to consider a long position in.

Disclosure: None