Is ChipMOS Technologies Inc (IMOS) A Good Stock To Buy?

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding ChipMOS Technologies Inc (NASDAQ:IMOS).

Is IMOS a good stock to buy? ChipMOS Technologies Inc (NASDAQ:IMOS) shareholders have witnessed an increase in enthusiasm from smart money in recent months. ChipMOS Technologies Inc (NASDAQ:IMOS) was in 3 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 18. Our calculations also showed that IMOS isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 115 percentage points since March 2017 (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.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $26 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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. With all of this in mind we’re going to check out the fresh hedge fund action encompassing ChipMOS Technologies Inc (NASDAQ:IMOS).

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

At Q1’s end, a total of 3 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 50% from one quarter earlier. By comparison, 2 hedge funds held shares or bullish call options in IMOS 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.

Among these funds, Renaissance Technologies held the most valuable stake in ChipMOS Technologies Inc (NASDAQ:IMOS), which was worth $50.5 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $2.4 million worth of shares. Citadel Investment Group was 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 Renaissance Technologies allocated the biggest weight to ChipMOS Technologies Inc (NASDAQ:IMOS), around 0.06% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.0032 percent of its 13F equity portfolio to IMOS.

As industrywide interest jumped, key money managers were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, created the largest position in ChipMOS Technologies Inc (NASDAQ:IMOS). Citadel Investment Group had $0.3 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $0.2 million investment in the stock during the quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as ChipMOS Technologies Inc (NASDAQ:IMOS) but similarly valued. These stocks are Green Brick Partners Inc (NASDAQ:GRBK), Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), MiMedx Group Inc (NASDAQ:MDXG), Genesis Energy, L.P. (NYSE:GEL), Hibbett Sports, Inc. (NASDAQ:HIBB), SMART Global Holdings, Inc. (NASDAQ:SGH), and Berkshire Hills Bancorp, Inc. (NYSE:BHLB). This group of stocks’ market values are closest to IMOS’s market value.

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As you can see these stocks had an average of 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $158 million. That figure was $53 million in IMOS’s case. Green Brick Partners Inc (NASDAQ:GRBK) is the most popular stock in this table. On the other hand Genesis Energy, L.P. (NYSE:GEL) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks ChipMOS Technologies Inc (NASDAQ:IMOS) is even less popular than GEL. Our overall hedge fund sentiment score for IMOS is 11. 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. Hedge funds clearly dropped the ball on IMOS as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on IMOS as the stock returned 9% since Q1 (through June 11th) and outperformed the market by an even larger margin.

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