The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 866 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article we look at what those investors think of Super Micro Computer, Inc. (NASDAQ:SMCI).
Is Super Micro Computer, Inc. (NASDAQ:SMCI) a buy right now? The smart money was becoming more confident. The number of bullish hedge fund bets improved by 1 lately. Super Micro Computer, Inc. (NASDAQ:SMCI) was in 21 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 24. Our calculations also showed that SMCI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 20 hedge funds in our database with SMCI holdings at the end of December.
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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. With all of this in mind let’s analyze the recent hedge fund action regarding Super Micro Computer, Inc. (NASDAQ:SMCI).
Do Hedge Funds Think SMCI Is A Good Stock To Buy Now?
At first quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the fourth quarter of 2020. On the other hand, there were a total of 24 hedge funds with a bullish position in SMCI a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Oaktree Capital Management was the largest shareholder of Super Micro Computer, Inc. (NASDAQ:SMCI), with a stake worth $111.3 million reported as of the end of March. Trailing Oaktree Capital Management was Empyrean Capital Partners, which amassed a stake valued at $87.6 million. Madison Avenue Partners, Hawk Ridge Management, and Pzena Investment 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 Madison Avenue Partners allocated the biggest weight to Super Micro Computer, Inc. (NASDAQ:SMCI), around 24.19% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, dishing out 4.93 percent of its 13F equity portfolio to SMCI.
As aggregate interest increased, key money managers have jumped into Super Micro Computer, Inc. (NASDAQ:SMCI) headfirst. Mangrove Partners, managed by Nathaniel August, assembled the most outsized position in Super Micro Computer, Inc. (NASDAQ:SMCI). Mangrove Partners had $9.3 million invested in the company at the end of the quarter. Peter Algert’s Algert Global also made a $1.3 million investment in the stock during the quarter. The other funds with brand new SMCI positions are Brandon Haley’s Holocene Advisors, Anthony S. Daffer’s Provenire Capital, and Ken Griffin’s Citadel Investment Group.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Super Micro Computer, Inc. (NASDAQ:SMCI) but similarly valued. These stocks are Madison Square Garden Entertainment Corp. (NYSE:MSGE), Burford Capital Limited (NYSE:BUR), La-Z-Boy Incorporated (NYSE:LZB), Columbia Property Trust Inc (NYSE:CXP), Goldman Sachs BDC, Inc. (NYSE:GSBD), American Assets Trust, Inc (NYSE:AAT), and Sun Country Airlines Holdings, Inc. (NASDAQ:SNCY). This group of stocks’ market values resemble SMCI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MSGE | 23 | 324971 | -4 |
| BUR | 6 | 30046 | -1 |
| LZB | 24 | 110904 | 11 |
| CXP | 12 | 62630 | -1 |
| GSBD | 5 | 5208 | 3 |
| AAT | 12 | 19323 | -2 |
| SNCY | 20 | 173113 | 20 |
| Average | 14.6 | 103742 | 3.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.6 hedge funds with bullish positions and the average amount invested in these stocks was $104 million. That figure was $447 million in SMCI’s case. La-Z-Boy Incorporated (NYSE:LZB) is the most popular stock in this table. On the other hand Goldman Sachs BDC, Inc. (NYSE:GSBD) is the least popular one with only 5 bullish hedge fund positions. Super Micro Computer, Inc. (NASDAQ:SMCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SMCI is 74.4. 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 positive signal but 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 23.8% in 2021 through July 16th and beat the market again by 7.7 percentage points. Unfortunately SMCI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SMCI were disappointed as the stock returned -12.6% since the end of March (through 7/16) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
