As we already know from media reports and hedge fund investor letters, many hedge funds lost money in fourth quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with technology among them. Nevertheless, most investors decided to stick to their bullish theses and recouped their losses by the end of the first quarter. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Diodes Incorporated (NASDAQ:DIOD).
Is Diodes Incorporated (NASDAQ:DIOD) a cheap investment today? Hedge funds are getting more bullish. The number of long hedge fund positions rose by 4 lately. Our calculations also showed that DIOD isn’t among the 30 most popular stocks among hedge funds. DIOD was in 19 hedge funds’ portfolios at the end of the first quarter of 2019. There were 15 hedge funds in our database with DIOD positions at the end of the previous quarter.
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.
We’re going to take a peek at the fresh hedge fund action surrounding Diodes Incorporated (NASDAQ:DIOD).
How have hedgies been trading Diodes Incorporated (NASDAQ:DIOD)?
At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards DIOD over the last 15 quarters. With the smart money’s sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Royce & Associates held the most valuable stake in Diodes Incorporated (NASDAQ:DIOD), which was worth $16.5 million at the end of the first quarter. On the second spot was Arrowstreet Capital which amassed $13.6 million worth of shares. Moreover, Millennium Management, Marshall Wace LLP, and Fisher Asset Management were also bullish on Diodes Incorporated (NASDAQ:DIOD), allocating a large percentage of their portfolios to this stock.
With a general bullishness amongst the heavyweights, key money managers have jumped into Diodes Incorporated (NASDAQ:DIOD) headfirst. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, assembled the biggest position in Diodes Incorporated (NASDAQ:DIOD). Marshall Wace LLP had $8.8 million invested in the company at the end of the quarter. Frank Slattery’s Symmetry Peak Management also made a $1.5 million investment in the stock during the quarter. The other funds with brand new DIOD positions are Matthew Hulsizer’s PEAK6 Capital Management, Matthew Hulsizer’s PEAK6 Capital Management, and Matthew Tewksbury’s Stevens Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Diodes Incorporated (NASDAQ:DIOD) but similarly valued. We will take a look at PriceSmart, Inc. (NASDAQ:PSMT), BGC Partners, Inc. (NASDAQ:BGCP), TowneBank (NASDAQ:TOWN), and Livent Corporation (NYSE:LTHM). All of these stocks’ market caps resemble DIOD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PSMT | 10 | 41769 | 2 |
| BGCP | 26 | 252988 | 3 |
| TOWN | 7 | 33308 | -1 |
| LTHM | 25 | 358707 | 15 |
| Average | 17 | 171693 | 4.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $172 million. That figure was $96 million in DIOD’s case. BGC Partners, Inc. (NASDAQ:BGCP) is the most popular stock in this table. On the other hand TowneBank (NASDAQ:TOWN) is the least popular one with only 7 bullish hedge fund positions. Diodes Incorporated (NASDAQ:DIOD) 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 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately DIOD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on DIOD were disappointed as the stock returned -2.9% during the same 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 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.
