Hedge Funds Are Piling Into Analog Devices, Inc. (ADI)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Analog Devices, Inc. (NASDAQ:ADI) based on that data.

Analog Devices, Inc. (NASDAQ:ADI) investors should pay attention to an increase in support from the world’s most elite money managers of late. Analog Devices, Inc. (NASDAQ:ADI) was in 62 hedge funds’ portfolios at the end of June. The all time high for this statistic is 58. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ADI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Eric Mandelblatt of Soroban Capital Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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 take a peek at the fresh hedge fund action encompassing Analog Devices, Inc. (NASDAQ:ADI).

Do Hedge Funds Think ADI Is A Good Stock To Buy Now?

At the end of June, a total of 62 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 24% from the first quarter of 2020. By comparison, 49 hedge funds held shares or bullish call options in ADI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Generation Investment Management was the largest shareholder of Analog Devices, Inc. (NASDAQ:ADI), with a stake worth $835.8 million reported as of the end of June. Trailing Generation Investment Management was Cantillon Capital Management, which amassed a stake valued at $596.2 million. Soroban Capital Partners, Citadel Investment Group, and First Pacific Advisors LLC 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 Albar Capital allocated the biggest weight to Analog Devices, Inc. (NASDAQ:ADI), around 8.16% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, setting aside 7.38 percent of its 13F equity portfolio to ADI.

As industrywide interest jumped, specific money managers have jumped into Analog Devices, Inc. (NASDAQ:ADI) headfirst. Renaissance Technologies, established the most valuable position in Analog Devices, Inc. (NASDAQ:ADI). Renaissance Technologies had $101.4 million invested in the company at the end of the quarter. Aaron Cowen’s Suvretta Capital Management also made a $53.7 million investment in the stock during the quarter. The other funds with brand new ADI positions are Paul Marshall and Ian Wace’s Marshall Wace LLP, Javier Velazquez’s Albar Capital, and Ray Dalio’s Bridgewater Associates.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Analog Devices, Inc. (NASDAQ:ADI) but similarly valued. These stocks are Stellantis N.V. (NYSE:STLA), Banco Santander (Brasil) SA (NYSE:BSBR), Roku, Inc. (NASDAQ:ROKU), Boston Scientific Corporation (NYSE:BSX), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Dominion Energy Inc. (NYSE:D), and Ford Motor Company (NYSE:F). This group of stocks’ market valuations are similar to ADI’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 40.6 hedge funds with bullish positions and the average amount invested in these stocks was $2068 million. That figure was $5796 million in ADI’s case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Analog Devices, Inc. (NASDAQ:ADI) is more popular among hedge funds. Our overall hedge fund sentiment score for ADI is 90. 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. 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 25.7% in 2021 through September 27th and still beat the market by 6.2 percentage points. Unfortunately ADI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ADI were disappointed as the stock returned 3.2% since the end of the second quarter (through 9/27) 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 most of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.