Is CREE Stock A Buy or Sell?

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Cree, Inc. (NASDAQ:CREE).

Is CREE stock a buy? Hedge funds were taking an optimistic view. The number of bullish hedge fund positions improved by 3 recently. Cree, Inc. (NASDAQ:CREE) was in 33 hedge funds’ portfolios at the end of December. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CREE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 30 hedge funds in our database with CREE holdings at the end of September.

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 124 percentage points since March 2017 (see the details here).

Alex Sacerdote of Whale Rock Capital Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 website. Now let’s check out the key hedge fund action encompassing Cree, Inc. (NASDAQ:CREE).

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

Heading into the first quarter of 2021, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CREE over the last 22 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alex Sacerdote’s Whale Rock Capital Management has the most valuable position in Cree, Inc. (NASDAQ:CREE), worth close to $431.7 million, corresponding to 2.9% of its total 13F portfolio. The second most bullish fund manager is Philippe Laffont of Coatue Management, with a $204.3 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism consist of David Cohen and Harold Levy’s Iridian Asset Management, Glen Kacher’s Light Street Capital and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Panview Capital allocated the biggest weight to Cree, Inc. (NASDAQ:CREE), around 13.92% of its 13F portfolio. Whale Rock Capital Management is also relatively very bullish on the stock, dishing out 2.87 percent of its 13F equity portfolio to CREE.

As industrywide interest jumped, some big names have been driving this bullishness. Panview Capital, managed by Ryan Thall, created the most valuable position in Cree, Inc. (NASDAQ:CREE). Panview Capital had $15 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $13.7 million position during the quarter. The other funds with new positions in the stock are Larry Chen and Terry Zhang’s Tairen Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Michael Cowley’s Sandbar Asset Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cree, Inc. (NASDAQ:CREE) but similarly valued. We will take a look at Medical Properties Trust, Inc. (NYSE:MPW), Nordson Corporation (NASDAQ:NDSN), International Flavors & Fragrances Inc (NYSE:IFF), Chegg Inc (NYSE:CHGG), Essential Utilities Inc (NYSE:WTRG), PulteGroup, Inc. (NYSE:PHM), and Equity Lifestyle Properties, Inc. (NYSE:ELS). This group of stocks’ market valuations match CREE’s market valuation.

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As you can see these stocks had an average of 25.7 hedge funds with bullish positions and the average amount invested in these stocks was $519 million. That figure was $1071 million in CREE’s case. PulteGroup, Inc. (NYSE:PHM) is the most popular stock in this table. On the other hand Essential Utilities Inc (NYSE:WTRG) is the least popular one with only 13 bullish hedge fund positions. Cree, Inc. (NASDAQ:CREE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CREE is 75. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on CREE as the stock returned 8.8% since the end of Q4 (through 4/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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