Hedge Funds Cashing Out Of Silicon Laboratories (SLAB)

In this article we will take a look at whether hedge funds think Silicon Laboratories (NASDAQ:SLAB) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Silicon Laboratories (NASDAQ:SLAB) going to take off soon? Prominent investors are becoming less hopeful. The number of bullish hedge fund positions shrunk by 6 in recent months. Our calculations also showed that SLAB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Clint Carlson of Carlson Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to view the fresh hedge fund action surrounding Silicon Laboratories (NASDAQ:SLAB).

How have hedgies been trading Silicon Laboratories (NASDAQ:SLAB)?

Heading into the second quarter of 2020, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SLAB over the last 18 quarters. 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, Polar Capital was the largest shareholder of Silicon Laboratories (NASDAQ:SLAB), with a stake worth $11.5 million reported as of the end of September. Trailing Polar Capital was Carlson Capital, which amassed a stake valued at $9.4 million. Millennium Management, Renaissance Technologies, and G2 Investment Partners 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 G2 Investment Partners Management allocated the biggest weight to Silicon Laboratories (NASDAQ:SLAB), around 1.67% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.49 percent of its 13F equity portfolio to SLAB.

Judging by the fact that Silicon Laboratories (NASDAQ:SLAB) has experienced declining sentiment from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers who were dropping their positions entirely heading into Q4. Interestingly, John Osterweis’s Osterweis Capital Management cut the largest investment of all the hedgies tracked by Insider Monkey, totaling close to $4.2 million in stock, and Richard Driehaus’s Driehaus Capital was right behind this move, as the fund dropped about $4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 6 funds heading into Q4.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Silicon Laboratories (NASDAQ:SLAB) but similarly valued. These stocks are Deckers Outdoor Corp (NASDAQ:DECK), Vir Biotechnology, Inc. (NASDAQ:VIR), Jabil Inc. (NYSE:JBL), and Ritchie Bros. Auctioneers (NYSE:RBA). All of these stocks’ market caps are similar to SLAB’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $251 million. That figure was $59 million in SLAB’s case. Deckers Outdoor Corp (NASDAQ:DECK) is the most popular stock in this table. On the other hand Vir Biotechnology, Inc. (NASDAQ:VIR) is the least popular one with only 4 bullish hedge fund positions. Silicon Laboratories (NASDAQ:SLAB) 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.2% in 2020 through June 17th but beat the market by 14.8 percentage points. Unfortunately SLAB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SLAB were disappointed as the stock returned 15.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.