We can judge whether Diodes Incorporated (NASDAQ:DIOD) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Diodes Incorporated (NASDAQ:DIOD) was in 15 hedge funds’ portfolios at the end of the fourth quarter of 2018. DIOD investors should be aware of a decrease in support from the world’s most elite money managers in recent months. There were 17 hedge funds in our database with DIOD holdings at the end of the previous quarter. Our calculations also showed that diod isn’t among the 30 most popular stocks among hedge funds.
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 take a look at the fresh hedge fund action surrounding Diodes Incorporated (NASDAQ:DIOD).
What does the smart money think about Diodes Incorporated (NASDAQ:DIOD)?
At Q4’s end, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards DIOD over the last 14 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
More specifically, Royce & Associates was the largest shareholder of Diodes Incorporated (NASDAQ:DIOD), with a stake worth $15.7 million reported as of the end of December. Trailing Royce & Associates was Fisher Asset Management, which amassed a stake valued at $7.8 million. Millennium Management, Gotham Asset Management, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Diodes Incorporated (NASDAQ:DIOD) has experienced declining sentiment from hedge fund managers, we can see that there exists a select few money managers who sold off their entire stakes last quarter. Interestingly, Mike Vranos’s Ellington cut the biggest stake of all the hedgies watched by Insider Monkey, totaling about $0.3 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also cut its stock, about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds last quarter.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Diodes Incorporated (NASDAQ:DIOD) but similarly valued. These stocks are Cooper Tire & Rubber Company (NYSE:CTB), Invesco Mortgage Capital Inc (NYSE:IVR), CNOOC Limited (NYSE:CEO), and Provident Financial Services, Inc. (NYSE:PFS). All of these stocks’ market caps are similar to DIOD’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTB | 17 | 140866 | 7 |
| IVR | 13 | 27092 | 2 |
| CEO | 15 | 265499 | 0 |
| PFS | 8 | 51876 | 0 |
| Average | 13.25 | 121333 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $121 million. That figure was $69 million in DIOD’s case. Cooper Tire & Rubber Company (NYSE:CTB) is the most popular stock in this table. On the other hand Provident Financial Services, Inc. (NYSE:PFS) is the least popular one with only 8 bullish hedge fund positions. Diodes Incorporated (NASDAQ:DIOD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately DIOD wasn’t nearly as popular as these 15 stock and hedge funds that were betting on DIOD were disappointed as the stock returned 12.7% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
