Here is What Hedge Funds Think About Silicon Laboratories (SLAB)

We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Silicon Laboratories (NASDAQ:SLAB) , and what that likely means for the prospects of the company and its stock.

Silicon Laboratories (NASDAQ:SLAB) shareholders have witnessed an increase in enthusiasm from smart money of late. SLAB was in 15 hedge funds’ portfolios at the end of September. There were 12 hedge funds in our database with SLAB positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Hawaiian Holdings, Inc. (NASDAQ:HA), Essent Group Ltd (NYSE:ESNT), and Suburban Propane Partners LP (NYSE:SPH) to gather more data points.

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How are hedge funds trading Silicon Laboratories (NASDAQ:SLAB)?

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a gain of 25% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SLAB over the last 5 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Clint Carlson’s Carlson Capital has the largest position in Silicon Laboratories (NASDAQ:SLAB), worth close to $50.3 million. The second most bullish fund manager is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $27.3 million position. Some other members of the smart money that hold long positions contain D. E. Shaw’s D E Shaw, and Israel Englander’s Millennium Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

With a general bullishness amongst the heavyweights, key money managers have been driving this bullishness. AQR Capital Management, led by Cliff Asness, created the most valuable position in Silicon Laboratories (NASDAQ:SLAB). AQR Capital Management had $5.9 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $2.9 million investment in the stock during the quarter. The following funds were also among the new SLAB investors: Frank Slattery’s Symmetry Peak Management, David Costen Haley’s HBK Investments, and Ken Griffin’s Citadel Investment Group.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Silicon Laboratories (NASDAQ:SLAB) but similarly valued. These stocks are Hawaiian Holdings, Inc. (NASDAQ:HA), Essent Group Ltd (NYSE:ESNT), Suburban Propane Partners LP (NYSE:SPH), and Electronics For Imaging, Inc. (NASDAQ:EFII). This group of stocks’ market caps are closest to SLAB’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $125 million. That figure was $112 million in SLAB’s case. Hawaiian Holdings, Inc. (NASDAQ:HA) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 4 bullish hedge fund positions. Silicon Laboratories (NASDAQ:SLAB) 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 HA might be a better candidate to consider taking a long position in.

Disclosure: None