Hedge Funds Feel Good About Coherent, Inc. (COHR)

Looking for high-potential stocks? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 7.6% in the 12 months ending November 21, with more than 51% of the stocks in the index failing to beat the benchmark. Therefore, the odds that one will pin down a winner by randomly picking a stock are less than the odds in a fair coin-tossing game. Conversely, best performing hedge funds’ 30 preferred mid-cap stocks generated a return of 18% during the same 12-month period. Coincidence? It might happen to be so, but it is unlikely. Our research covering a 17-year period indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Coherent, Inc. (NASDAQ:COHR).

Is Coherent, Inc. (NASDAQ:COHR) undervalued? Prominent investors are turning bullish. The number of bullish hedge fund positions rose by 1 lately. COHR was in 23 hedge funds’ portfolios at the end of the third quarter of 2016. There were 22 hedge funds in our database with COHR positions 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 AMAYA INC (NASDAQ:AYA), Big Lots, Inc. (NYSE:BIG), and Cathay General Bancorp (NASDAQ:CATY) 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.

bart78/Shutterstock.com

Hedge fund activity in Coherent, Inc. (NASDAQ:COHR)

At Q3’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 5% increase from the previous quarter. Hedge fund ownership has not dipped in any of the last four quarters, while rising by over 33% overall. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in Coherent, Inc. (NASDAQ:COHR), worth close to $55.4 million. The second most bullish fund manager is Columbus Circle Investors, managed by Principal Global Investors, which holds a $21.7 million position. Other hedge funds and institutional investors with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and Charles Paquelet’s Skylands Capital.

Now, some big names have jumped into Coherent, Inc. (NASDAQ:COHR) headfirst. Citadel Investment Group created the biggest position in Coherent, Inc. (NASDAQ:COHR). Citadel Investment Group had $15.7 million invested in the company at the end of the quarter. Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital also initiated a $9.4 million position during the quarter. The other funds with brand new COHR positions are Ira Unschuld’s Brant Point Investment Management, Peter Muller’s PDT Partners, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Coherent, Inc. (NASDAQ:COHR) but similarly valued. We will take a look at AMAYA INC (NASDAQ:AYA), Big Lots, Inc. (NYSE:BIG), Cathay General Bancorp (NASDAQ:CATY), and Media General, Inc. (NYSE:MEG). This group of stocks’ market valuations are closest to COHR’s market valuation.

As you can see these stocks had an average of 21.75 hedge funds with bullish positions and the average amount invested in these stocks was $416 million. That figure was $174 million in COHR’s case. Media General, Inc. (NYSE:MEG) is the most popular stock in this table. On the other hand Cathay General Bancorp (NASDAQ:CATY) is the least popular one with only 12 bullish hedge fund positions. Coherent, Inc. (NASDAQ:COHR) 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 MEG might be a better candidate to consider a long position.

Disclosure: None