We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI).
MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) shareholders have witnessed a decrease in hedge fund sentiment lately. Our calculations also showed that MTSI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & Associates
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the new hedge fund action surrounding MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI).
How have hedgies been trading MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI)?
At the end of the third quarter, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MTSI over the last 17 quarters. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
The largest stake in MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) was held by Yiheng Capital, which reported holding $68.5 million worth of stock at the end of September. It was followed by D E Shaw with a $60.2 million position. Other investors bullish on the company included Greenhouse Funds, Royce & Associates, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Yiheng Capital allocated the biggest weight to MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI), around 8.38% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, setting aside 4.38 percent of its 13F equity portfolio to MTSI.
Because MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) has experienced a decline in interest from hedge fund managers, it’s easy to see that there was a specific group of hedge funds that elected to cut their positions entirely heading into Q4. At the top of the heap, Anand Parekh’s Alyeska Investment Group sold off the largest stake of the 750 funds followed by Insider Monkey, totaling an estimated $4.8 million in stock. Marc Majzner’s fund, Clearline Capital, also cut its stock, about $2.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 3 funds heading into Q4.
Let’s go over hedge fund activity in other stocks similar to MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI). We will take a look at Atkore International Group Inc. (NYSE:ATKR), The RMR Group Inc. (NASDAQ:RMR), The Liberty Braves Group (NASDAQ:BATRK), and Linx S.A. (NYSE:LINX). This group of stocks’ market caps are closest to MTSI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ATKR | 19 | 104150 | 2 |
| RMR | 20 | 186711 | -2 |
| BATRK | 22 | 318173 | -1 |
| LINX | 5 | 35694 | -9 |
| Average | 16.5 | 161182 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.5 hedge funds with bullish positions and the average amount invested in these stocks was $161 million. That figure was $197 million in MTSI’s case. The Liberty Braves Group (NASDAQ:BATRK) is the most popular stock in this table. On the other hand Linx S.A. (NYSE:LINX) is the least popular one with only 5 bullish hedge fund positions. MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on MTSI as the stock returned 14.7% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
