Before we spend many hours researching a company, we’d like to analyze what insiders, hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL).
Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) has experienced an increase in enthusiasm from smart money recently. Our calculations also showed that AOSL isn’t among the 30 most popular stocks among hedge funds.
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 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s take a gander at the fresh hedge fund action surrounding Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL).
How are hedge funds trading Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL)?
Heading into the fourth quarter of 2018, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2018. On the other hand, there were a total of 10 hedge funds with a bullish position in AOSL at the beginning of this year. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
The largest stake in Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) was held by Royce & Associates, which reported holding $15.8 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $13.4 million position. Other investors bullish on the company included D E Shaw, AQR Capital Management, and Millennium Management.
As one would reasonably expect, specific money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the largest position in Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL). Arrowstreet Capital had $0.4 million invested in the company at the end of the quarter. Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital also initiated a $0 million position during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) but similarly valued. We will take a look at Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG), Graham Corporation (NYSEAMEX:GHM), Majesco (NYSE:MJCO), and Monroe Capital Corp (NASDAQ:MRCC). This group of stocks’ market valuations are similar to AOSL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DFRG | 14 | 49353 | -1 |
| GHM | 8 | 25936 | 1 |
| MJCO | 2 | 290 | 1 |
| MRCC | 2 | 2838 | -1 |
| Average | 6.5 | 19604 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $45 million in AOSL’s case. Del Frisco’s Restaurant Group Inc (NASDAQ:DFRG) is the most popular stock in this table. On the other hand Majesco (NYSE:MJCO) is the least popular one with only 2 bullish hedge fund positions. Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) 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 DFRG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
