In this article you are going to find out whether hedge funds think NeoPhotonics Corp (NYSE:NPTN) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.
Is NeoPhotonics Corp (NYSE:NPTN) ready to rally soon? The smart money is becoming hopeful. The number of bullish hedge fund positions increased by 5 recently. Our calculations also showed that NPTN 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.
To the average investor there are a multitude of formulas stock market investors can use to size up publicly traded companies. A couple of the most innovative formulas are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outclass the market by a very impressive margin (see the details here).
Joel Greenblatt of Gotham Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. 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. Keeping this in mind let’s check out the key hedge fund action encompassing NeoPhotonics Corp (NYSE:NPTN).
How have hedgies been trading NeoPhotonics Corp (NYSE:NPTN)?
Heading into the second quarter of 2020, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NPTN over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the number one position in NeoPhotonics Corp (NYSE:NPTN). Renaissance Technologies has a $14.6 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Masters Capital Management, led by Mike Masters, holding a $7.3 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism comprise D. E. Shaw’s D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’s AQR Capital Management. In terms of the portfolio weights assigned to each position Litespeed Management allocated the biggest weight to NeoPhotonics Corp (NYSE:NPTN), around 5.76% of its 13F portfolio. Boardman Bay Capital Management is also relatively very bullish on the stock, dishing out 2.63 percent of its 13F equity portfolio to NPTN.
As industrywide interest jumped, specific money managers have been driving this bullishness. Manatuck Hill Partners, managed by Mark Broach, created the most valuable position in NeoPhotonics Corp (NYSE:NPTN). Manatuck Hill Partners had $1.7 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $0.7 million investment in the stock during the quarter. The following funds were also among the new NPTN investors: Minhua Zhang’s Weld Capital Management, Joel Greenblatt’s Gotham Asset Management, and Thomas Bailard’s Bailard Inc.
Let’s now review hedge fund activity in other stocks similar to NeoPhotonics Corp (NYSE:NPTN). These stocks are Resources Connection, Inc. (NASDAQ:RECN), Village Super Market, Inc. (NASDAQ:VLGEA), Adaptimmune Therapeutics plc (NASDAQ:ADAP), and Tuscan Holdings Corp. (NASDAQ:THCB). This group of stocks’ market valuations match NPTN’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RECN | 10 | 39658 | -2 |
| VLGEA | 7 | 22483 | -3 |
| ADAP | 11 | 163151 | 2 |
| THCB | 9 | 62865 | -1 |
| Average | 9.25 | 72039 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $69 million in NPTN’s case. Adaptimmune Therapeutics plc (NASDAQ:ADAP) is the most popular stock in this table. On the other hand Village Super Market, Inc. (NASDAQ:VLGEA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks NeoPhotonics Corp (NYSE:NPTN) is more popular among hedge funds. 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 returned 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on NPTN as the stock returned 35.4% so far in Q2 (through June 10th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
