We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Himax Technologies, Inc. (NASDAQ:HIMX).
Himax Technologies, Inc. (NASDAQ:HIMX) was in 8 hedge funds’ portfolios at the end of the second quarter of 2019. HIMX shareholders have witnessed a decrease in hedge fund sentiment of late. There were 9 hedge funds in our database with HIMX positions at the end of the previous quarter. Our calculations also showed that HIMX isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the latest hedge fund action surrounding Himax Technologies, Inc. (NASDAQ:HIMX).
What have hedge funds been doing with Himax Technologies, Inc. (NASDAQ:HIMX)?
At Q2’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards HIMX over the last 16 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Himax Technologies, Inc. (NASDAQ:HIMX) was held by Yiheng Capital, which reported holding $13.1 million worth of stock at the end of March. It was followed by Renaissance Technologies with a $2.4 million position. Other investors bullish on the company included Mondrian Capital, Point72 Asset Management, and Citadel Investment Group.
Judging by the fact that Himax Technologies, Inc. (NASDAQ:HIMX) has faced declining sentiment from the smart money, logic holds that there was a specific group of hedgies who were dropping their positions entirely in the second quarter. Interestingly, William C. Martin’s Raging Capital Management dumped the largest position of the “upper crust” of funds followed by Insider Monkey, comprising close to $3.6 million in stock, and Gifford Combs’s Dalton Investments was right behind this move, as the fund said goodbye to about $1.3 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the second quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Himax Technologies, Inc. (NASDAQ:HIMX) but similarly valued. We will take a look at Barrett Business Services, Inc. (NASDAQ:BBSI), Huami Corporation (NYSE:HMI), Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX), and BlackRock MuniVest Fund, Inc. (NYSE:MVF). All of these stocks’ market caps resemble HIMX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BBSI | 11 | 81420 | -2 |
| HMI | 6 | 11514 | 2 |
| CRNX | 10 | 267066 | 1 |
| MVF | 1 | 458 | 0 |
| Average | 7 | 90115 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $90 million. That figure was $19 million in HIMX’s case. Barrett Business Services, Inc. (NASDAQ:BBSI) is the most popular stock in this table. On the other hand BlackRock MuniVest Fund, Inc. (NYSE:MVF) is the least popular one with only 1 bullish hedge fund positions. Himax Technologies, Inc. (NASDAQ:HIMX) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately HIMX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on HIMX were disappointed as the stock returned -34.8% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
