Hedge Funds Aren’t Crazy About Photronics, Inc. (PLAB) Anymore

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Photronics, Inc. (NASDAQ:PLAB) from the perspective of those successful funds.

Is Photronics, Inc. (NASDAQ:PLAB) a cheap stock to buy now? Investors who are in the know are getting less bullish. The number of long hedge fund investments experienced a decline of 3 in recent months. PLAB was in 15 hedge funds’ portfolios at the end of the third quarter of 2016. There were 18 hedge funds in our database with PLAB holdings at the end of the previous quarter. 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 Piper Jaffray Companies (NYSE:PJC), Eagle Pharmaceuticals Inc (NASDAQ:EGRX), and Jumei International Holding Ltd (ADR) (NYSE:JMEI) to gather more data points.

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 have hedge funds been doing with Photronics, Inc. (NASDAQ:PLAB)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PLAB over the last 5 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’ Renaissance Technologies has the biggest position in Photronics, Inc. (NASDAQ:PLAB), worth close to $20.5 million. The second largest stake is held by Chuck Royce of Royce & Associates, with a $12.3 million position. Other members of the smart money that hold long positions include D. E. Shaw’s D E Shaw, Cliff Asness’ AQR Capital Management and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Seeing as Photronics, Inc. (NASDAQ:PLAB) has experienced bearish sentiment from the smart money, we can see that there were a few hedgies that slashed their full holdings heading into Q4. At the top of the heap, Joshua Packwood and Schuster Tanger’s Radix Partners said goodbye to the biggest investment of all the hedgies watched by Insider Monkey, comprising an estimated $0.3 million in stock. Louis Navellier’s fund, Navellier & Associates, also dumped its stock, about $0.2 million worth.

Let’s now take a look at hedge fund activity in other stocks similar to Photronics, Inc. (NASDAQ:PLAB). We will take a look at Piper Jaffray Companies (NYSE:PJC), Eagle Pharmaceuticals Inc (NASDAQ:EGRX), Jumei International Holding Ltd (ADR) (NYSE:JMEI), and National Bank Holdings Corp (NYSE:NBHC). This group of stocks’ market caps match PLAB’s market cap.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $95 million. That figure was $71 million in PLAB’s case. Eagle Pharmaceuticals Inc (NASDAQ:EGRX) is the most popular stock in this table. On the other hand Piper Jaffray Companies (NYSE:PJC) is the least popular one with only 7 bullish hedge fund positions. Photronics, Inc. (NASDAQ:PLAB) 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. In this regard EGRX might be a better candidate to consider taking a long position in.

Disclosure: None