Is Analog Devices, Inc. (ADI) A Good Stock To Buy?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 866 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their March 31st holdings, data that is available nowhere else. Should you consider Analog Devices, Inc. (NASDAQ:ADI) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.

Is ADI a good stock to buy? Analog Devices, Inc. (NASDAQ:ADI) shareholders have witnessed a decrease in hedge fund sentiment of late. Analog Devices, Inc. (NASDAQ:ADI) was in 50 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 58. Our calculations also showed that ADI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

At the moment there are a multitude of tools stock traders put to use to value stocks. A duo of the most underrated tools are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can beat the broader indices by a healthy margin (see the details here). Also, our monthly newsletter’s portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

William Von Mueffling of Cantillon Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Now let’s review the recent hedge fund action encompassing Analog Devices, Inc. (NASDAQ:ADI).

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

At first quarter’s end, a total of 50 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ADI over the last 23 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Among these funds, Generation Investment Management held the most valuable stake in Analog Devices, Inc. (NASDAQ:ADI), which was worth $851.3 million at the end of the fourth quarter. On the second spot was Cantillon Capital Management which amassed $543.2 million worth of shares. First Pacific Advisors LLC, Soroban Capital Partners, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Totem Point Management allocated the biggest weight to Analog Devices, Inc. (NASDAQ:ADI), around 7.28% of its 13F portfolio. Theleme Partners is also relatively very bullish on the stock, setting aside 5.96 percent of its 13F equity portfolio to ADI.

Judging by the fact that Analog Devices, Inc. (NASDAQ:ADI) has experienced falling interest from the entirety of the hedge funds we track, logic holds that there were a few fund managers that slashed their full holdings by the end of the first quarter. Interestingly, Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management dropped the biggest stake of all the hedgies followed by Insider Monkey, comprising about $166.7 million in stock. Renaissance Technologies, also dropped its stock, about $136 million worth. These moves are important to note, as total hedge fund interest was cut by 8 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks similar to Analog Devices, Inc. (NASDAQ:ADI). These stocks are Illumina, Inc. (NASDAQ:ILMN), The Progressive Corporation (NYSE:PGR), Moody’s Corporation (NYSE:MCO), Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX), NXP Semiconductors NV (NASDAQ:NXPI), Prudential Public Limited Company (NYSE:PUK), and Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR). This group of stocks’ market valuations match ADI’s market valuation.

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As you can see these stocks had an average of 43.1 hedge funds with bullish positions and the average amount invested in these stocks was $3264 million. That figure was $4861 million in ADI’s case. Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 2 bullish hedge fund positions. Analog Devices, Inc. (NASDAQ:ADI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADI is 59.2. 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. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Hedge funds were also right about betting on ADI, though not to the same extent, as the stock returned 5% since Q1 (through June 18th) and outperformed the market as well.

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