Looking for stocks with high upside potential? Just follow the big players within the hedge fund industry. Why should you do so? Let’s take a brief look at what statistics have to say about hedge funds’ stock picking abilities to illustrate. The Standard and Poor’s 500 Index returned approximately 13.1% in the 2.5 months of 2019 (including dividend payments). Conversely, hedge funds’ 15 preferred S&P 500 stocks generated a return of 19.7% during the same period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it is wise to check hedge fund activity before you invest your time or your savings on a stock like Silicon Laboratories Inc. (NASDAQ:SLAB).
Is Silicon Laboratories Inc. (NASDAQ:SLAB) ready to rally soon? Prominent investors are turning bullish. The number of long hedge fund positions rose by 3 recently. Our calculations also showed that slab isn’t among the 30 most popular stocks among hedge funds. SLAB was in 17 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 14 hedge funds in our database with SLAB holdings at the end of the previous quarter.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s analyze the key hedge fund action regarding Silicon Laboratories Inc. (NASDAQ:SLAB).
What does the smart money think about Silicon Laboratories Inc. (NASDAQ:SLAB)?
At Q4’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the second quarter of 2018. On the other hand, there were a total of 18 hedge funds with a bullish position in SLAB a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Carlson Capital was the largest shareholder of Silicon Laboratories Inc. (NASDAQ:SLAB), with a stake worth $14.7 million reported as of the end of September. Trailing Carlson Capital was D E Shaw, which amassed a stake valued at $10.6 million. Renaissance Technologies, AQR Capital Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As aggregate interest increased, key money managers were leading the bulls’ herd. Highbridge Capital Management, managed by Glenn Russell Dubin, initiated the largest position in Silicon Laboratories Inc. (NASDAQ:SLAB). Highbridge Capital Management had $15.9 million invested in the company at the end of the quarter. George Soros’s Soros Fund Management also initiated a $15.2 million position during the quarter. The following funds were also among the new SLAB investors: Matthew Hulsizer’s PEAK6 Capital Management, Joel Greenblatt’s Gotham Asset Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now take a look at hedge fund activity in other stocks similar to Silicon Laboratories Inc. (NASDAQ:SLAB). These stocks are The Scotts Miracle-Gro Company (NYSE:SMG), Graham Holdings Co (NYSE:GHC), Performance Food Group Company (NYSE:PFGC), and argenx SE (NASDAQ:ARGX). This group of stocks’ market caps match SLAB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SMG | 20 | 186663 | -3 |
| GHC | 19 | 615026 | 2 |
| PFGC | 18 | 159221 | -5 |
| ARGX | 27 | 709744 | -7 |
| Average | 21 | 417664 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $418 million. That figure was $58 million in SLAB’s case. argenx SE (NASDAQ:ARGX) is the most popular stock in this table. On the other hand Performance Food Group Company (NYSE:PFGC) is the least popular one with only 18 bullish hedge fund positions. Compared to these stocks Silicon Laboratories Inc. (NASDAQ:SLAB) is even less popular than PFGC. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on SLAB, though not to the same extent, as the stock returned 17.4% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
