We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Peltz’s recent General Electric losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Advanced Semiconductor Engineering (NYSE:ASX).
Advanced Semiconductor Engineering (NYSE:ASX) was in 8 hedge funds’ portfolios at the end of June. ASX shareholders have witnessed a decrease in hedge fund sentiment of late. There were 9 hedge funds in our database with ASX positions at the end of the previous quarter. Our calculations also showed that ASX isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 market by 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the new hedge fund action surrounding Advanced Semiconductor Engineering (NYSE:ASX).
What does smart money think about Advanced Semiconductor Engineering (NYSE:ASX)?
Heading into the third quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards ASX over the last 16 quarters. 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, Fisher Asset Management was the largest shareholder of Advanced Semiconductor Engineering (NYSE:ASX), with a stake worth $145.5 million reported as of the end of March. Trailing Fisher Asset Management was LMR Partners, which amassed a stake valued at $29 million. Renaissance Technologies, D E Shaw, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
Since Advanced Semiconductor Engineering (NYSE:ASX) has faced a decline in interest from the smart money, we can see that there is a sect of money managers that decided to sell off their entire stakes heading into Q3. Interestingly, Nick Thakore’s Diametric Capital dropped the largest stake of all the hedgies watched by Insider Monkey, valued at about $0.1 million in stock, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital was right behind this move, as the fund dropped about $0 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 funds heading into Q3.
Let’s now review hedge fund activity in other stocks similar to Advanced Semiconductor Engineering (NYSE:ASX). These stocks are Coty Inc (NYSE:COTY), Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), NICE Ltd. (NASDAQ:NICE), and Aspen Technology, Inc. (NASDAQ:AZPN). This group of stocks’ market caps match ASX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| COTY | 19 | 149821 | -5 |
| AVAL | 7 | 19032 | -1 |
| NICE | 19 | 381690 | 2 |
| AZPN | 26 | 1272257 | 1 |
| Average | 17.75 | 455700 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $456 million. That figure was $184 million in ASX’s case. Aspen Technology, Inc. (NASDAQ:AZPN) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 7 bullish hedge fund positions. Advanced Semiconductor Engineering (NYSE:ASX) 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 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on ASX as the stock returned 17.2% during the same time frame and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
