We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards MagnaChip Semiconductor Corporation (NYSE:MX).
Is MagnaChip Semiconductor Corporation (NYSE:MX) a healthy stock for your portfolio? The smart money was taking a bullish view. The number of bullish hedge fund bets improved by 2 recently. MagnaChip Semiconductor Corporation (NYSE:MX) was in 30 hedge funds’ portfolios at the end of March. The all time high for this statistic was previously 28. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
If you’d ask most stock holders, hedge funds are seen as underperforming, outdated financial vehicles of yesteryear. While there are greater than 8000 funds in operation at present, Our experts choose to focus on the aristocrats of this club, around 850 funds. Most estimates calculate that this group of people watch over the majority of all hedge funds’ total asset base, and by tracking their matchless investments, Insider Monkey has determined various investment strategies that have historically outperformed the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .
Howard Marks of Oaktree Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind let’s take a gander at the recent hedge fund action encompassing MagnaChip Semiconductor Corporation (NYSE:MX).
Do Hedge Funds Think MX Is A Good Stock To Buy Now?
At Q1’s end, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the fourth quarter of 2020. By comparison, 22 hedge funds held shares or bullish call options in MX a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Howard Marks’s Oaktree Capital Management has the most valuable position in MagnaChip Semiconductor Corporation (NYSE:MX), worth close to $70.5 million, accounting for 1.1% of its total 13F portfolio. The second largest stake is held by Rubric Capital Management, led by David Rosen, holding a $49.1 million position; 2.9% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism include Don Morgan’s Brigade Capital, Stephen Perkins’s Toronado Partners and Thomas Ellis and Todd Hammer’s North Run Capital. In terms of the portfolio weights assigned to each position North Run Capital allocated the biggest weight to MagnaChip Semiconductor Corporation (NYSE:MX), around 14.62% of its 13F portfolio. Toronado Partners is also relatively very bullish on the stock, dishing out 13.45 percent of its 13F equity portfolio to MX.
As one would reasonably expect, key money managers were leading the bulls’ herd. Alpine Associates, managed by Robert Emil Zoellner, created the most outsized position in MagnaChip Semiconductor Corporation (NYSE:MX). Alpine Associates had $12.5 million invested in the company at the end of the quarter. Andrew Weiss’s Weiss Asset Management also made a $3.3 million investment in the stock during the quarter. The other funds with new positions in the stock are John Bader’s Halcyon Asset Management, Crispin Odey’s Odey Asset Management Group, and Matthew Halbower’s Pentwater Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to MagnaChip Semiconductor Corporation (NYSE:MX). These stocks are ChipMOS Technologies Inc (NASDAQ:IMOS), Green Brick Partners Inc (NASDAQ:GRBK), Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), MiMedx Group Inc (NASDAQ:MDXG), Genesis Energy, L.P. (NYSE:GEL), Hibbett Sports, Inc. (NASDAQ:HIBB), and SMART Global Holdings, Inc. (NASDAQ:SGH). All of these stocks’ market caps resemble MX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IMOS | 3 | 53312 | 1 |
| GRBK | 18 | 472309 | 6 |
| SCHN | 12 | 15347 | 3 |
| MDXG | 14 | 50127 | 2 |
| GEL | 5 | 11071 | 1 |
| HIBB | 17 | 120320 | -3 |
| SGH | 16 | 399044 | -2 |
| Average | 12.1 | 160219 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.1 hedge funds with bullish positions and the average amount invested in these stocks was $160 million. That figure was $345 million in MX’s case. Green Brick Partners Inc (NASDAQ:GRBK) is the most popular stock in this table. On the other hand ChipMOS Technologies Inc (NASDAQ:IMOS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks MagnaChip Semiconductor Corporation (NYSE:MX) is more popular among hedge funds. Our overall hedge fund sentiment score for MX is 87. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. Unfortunately MX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MX were disappointed as the stock returned -4.4% since the end of the first quarter (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
Follow Magnachip Semiconductor Corp (NYSE:MX)
Follow Magnachip Semiconductor Corp (NYSE:MX)
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Disclosure: None. This article was originally published at Insider Monkey.
