We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (10 coronavirus predictions).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 835 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Monolithic Power Systems, Inc. (NASDAQ:MPWR).
Is Monolithic Power Systems, Inc. (NASDAQ:MPWR) a buy right now? Money managers are getting more optimistic. The number of long hedge fund bets increased by 1 recently. Our calculations also showed that MPWR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). MPWR was in 27 hedge funds’ portfolios at the end of December. There were 26 hedge funds in our database with MPWR holdings 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Phill Gross of Adage Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the fresh hedge fund action regarding Monolithic Power Systems, Inc. (NASDAQ:MPWR).
What have hedge funds been doing with Monolithic Power Systems, Inc. (NASDAQ:MPWR)?
At Q4’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the third quarter of 2019. On the other hand, there were a total of 25 hedge funds with a bullish position in MPWR a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Among these funds, GQG Partners held the most valuable stake in Monolithic Power Systems, Inc. (NASDAQ:MPWR), which was worth $92.9 million at the end of the third quarter. On the second spot was Whale Rock Capital Management which amassed $71.1 million worth of shares. Citadel Investment Group, GLG Partners, and Osterweis Capital 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 Crosslink Capital allocated the biggest weight to Monolithic Power Systems, Inc. (NASDAQ:MPWR), around 1.91% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, setting aside 1.44 percent of its 13F equity portfolio to MPWR.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. GQG Partners, managed by Rajiv Jain, assembled the most outsized position in Monolithic Power Systems, Inc. (NASDAQ:MPWR). GQG Partners had $92.9 million invested in the company at the end of the quarter. Phill Gross and Robert Atchinson’s Adage Capital Management also made a $11.9 million investment in the stock during the quarter. The following funds were also among the new MPWR investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Kevin Cottrell and Chris LaSusa’s KCL Capital, and Frank Slattery’s Symmetry Peak Management.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Monolithic Power Systems, Inc. (NASDAQ:MPWR) but similarly valued. We will take a look at Post Holdings Inc (NYSE:POST), Pentair plc (NYSE:PNR), ABIOMED, Inc. (NASDAQ:ABMD), and Douglas Emmett, Inc. (NYSE:DEI). This group of stocks’ market caps match MPWR’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| POST | 38 | 1515106 | 10 |
| PNR | 26 | 507381 | 1 |
| ABMD | 35 | 679670 | 11 |
| DEI | 19 | 631403 | -4 |
| Average | 29.5 | 833390 | 4.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $833 million. That figure was $325 million in MPWR’s case. Post Holdings Inc (NYSE:POST) is the most popular stock in this table. On the other hand Douglas Emmett, Inc. (NYSE:DEI) is the least popular one with only 19 bullish hedge fund positions. Monolithic Power Systems, Inc. (NASDAQ:MPWR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 22.3% in 2020 through March 16th but beat the market by 3.2 percentage points. A small number of hedge funds were also right about betting on MPWR, though not to the same extent, as the stock returned -23.6% during the same time period and outperformed the market.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
