Hedge Funds Are Dumping Himax Technologies, Inc. (ADR) (HIMX)

World-class money managers like Bill Ackman and Barry Rosenstein only invest their wealthy clients’ money after undertaking a rigorous examination of any potential stock. They are particularly successful in this regard when it comes to small-cap stocks, which their peerless research gives them a big information advantage on when it comes to judging their worth. It’s not surprising then that they generate their biggest returns from these stocks and invest more of their money in these stocks on average than other investors. It’s also not surprising then that we pay close attention to these picks ourselves and have built a market-beating investment strategy around them.

Is Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) a worthy stock to buy now? Investors who are in the know are taking a pessimistic view. The number of long hedge fund positions retreated by 5 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CoreSite Realty Corp (NYSE:COR), Dreamworks Animation Skg Inc (NASDAQ:DWA), and Penn National Gaming, Inc (NASDAQ:PENN) to gather more data points.

If you’d ask most stock holders, hedge funds are seen as unimportant, outdated investment vehicles of the past. While there are more than an 8000 funds trading at present, we hone in on the top tier of this group, approximately 700 funds. These hedge fund managers preside over bulk of the hedge fund industry’s total asset base, and by observing their top investments, Insider Monkey has unearthed a number of investment strategies that have historically outperformed the market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, let’s go over the recent action surrounding Himax Technologies, Inc. (ADR) (NASDAQ:HIMX).

How have hedgies been trading Himax Technologies, Inc. (ADR) (NASDAQ:HIMX)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of -31% from one quarter earlier. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Shannon River Fund Management, managed by Spencer M. Waxman, holds the largest position in Himax Technologies, Inc. (ADR) (NASDAQ:HIMX). Shannon River Fund Management has a $29.5 million position in the stock, comprising 5.5% of its 13F portfolio. Sitting at the No. 2 spot is Quentec Asset Management, led by Ken Hahn, holding a $15 million position; the fund has 2.6% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that hold long positions comprise Brian Ashford-Russell and Tim Woolley’s Polar Capital, Jim Simons’s Renaissance Technologies and Steve Cohen’s Point72 Asset Management.

Seeing as Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) has witnessed declining sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedge funds that slashed their positions entirely heading into Q4. It’s worth mentioning that Rob Romero’s Connective Capital Management dropped the biggest stake among the funds monitored by Insider Monkey, totaling an estimated $0.9 million in stock. Israel Englander’s fund, Millennium Management, also dumped its stock, about $0.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) but similarly valued. We will take a look at CoreSite Realty Corp (NYSE:COR), Dreamworks Animation Skg Inc (NASDAQ:DWA), Penn National Gaming, Inc (NASDAQ:PENN), and Hawaiian Holdings, Inc. (NASDAQ:HA). This group of stocks’ market caps match HIMX’s market cap.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $311 million. That figure was $86 million in HIMX’s case. Penn National Gaming, Inc (NASDAQ:PENN) is the most popular stock in this table. On the other hand Dreamworks Animation Skg Inc (NASDAQ:DWA) is the least popular one with only 9 bullish hedge fund positions. Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) registers a hedge fund interest below average and the funds we track amassed $86 million worth of stock at the end of September. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard PENN might be a better candidate to consider a long position.