Here is What Hedge Funds Think About CMC Materials, Inc. (CCMP)

In this article we will analyze whether CMC Materials, Inc. (NASDAQ:CCMP) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

CMC Materials, Inc. (NASDAQ:CCMP) investors should be aware of an increase in hedge fund interest recently. CMC Materials, Inc. (NASDAQ:CCMP) was in 22 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 24. There were 19 hedge funds in our database with CCMP positions at the end of the first quarter. Our calculations also showed that CCMP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Dmitry Balyasny of Balyasny Asset Management

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. With all of this in mind we’re going to view the latest hedge fund action regarding CMC Materials, Inc. (NASDAQ:CCMP).

Do Hedge Funds Think CCMP Is A Good Stock To Buy Now?

At second quarter’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the first quarter of 2020. On the other hand, there were a total of 23 hedge funds with a bullish position in CCMP a year ago. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, managed by Chuck Royce, holds the biggest position in CMC Materials, Inc. (NASDAQ:CCMP). Royce & Associates has a $83.2 million position in the stock, comprising 0.6% of its 13F portfolio. The second most bullish fund manager is Millennium Management, led by Israel Englander, holding a $57.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other peers that are bullish comprise Dmitry Balyasny’s Balyasny Asset Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to CMC Materials, Inc. (NASDAQ:CCMP), around 0.85% of its 13F portfolio. Clearline Capital is also relatively very bullish on the stock, setting aside 0.84 percent of its 13F equity portfolio to CCMP.

Now, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, assembled the most valuable position in CMC Materials, Inc. (NASDAQ:CCMP). Balyasny Asset Management had $20 million invested in the company at the end of the quarter. Marc Majzner’s Clearline Capital also initiated a $5.6 million position during the quarter. The following funds were also among the new CCMP investors: Robert Vincent McHugh’s Jade Capital Advisors, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Jinghua Yan’s TwinBeech Capital.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CMC Materials, Inc. (NASDAQ:CCMP) but similarly valued. We will take a look at National Beverage Corp. (NASDAQ:FIZZ), MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), Sonos, Inc. (NASDAQ:SONO), ACI Worldwide Inc (NASDAQ:ACIW), Alignment Healthcare, Inc. (NASDAQ:ALHC), ICU Medical, Inc. (NASDAQ:ICUI), and Tenable Holdings, Inc. (NASDAQ:TENB). This group of stocks’ market caps match CCMP’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26 hedge funds with bullish positions and the average amount invested in these stocks was $394 million. That figure was $216 million in CCMP’s case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand Alignment Healthcare, Inc. (NASDAQ:ALHC) is the least popular one with only 4 bullish hedge fund positions. CMC Materials, Inc. (NASDAQ:CCMP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CCMP is 56.4. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24% in 2021 through October 22nd and surpassed the market again by 1.6 percentage points. Unfortunately CCMP wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CCMP investors were disappointed as the stock returned -14.8% since the end of June (through 10/22) 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 in 2021.

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Disclosure: None. This article was originally published at Insider Monkey.