Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
MaxLinear, Inc. (NYSE:MXL) has experienced a decrease in hedge fund interest in recent months. MXL was in 24 hedge funds’ portfolios at the end of the third quarter of 2016. There were 26 hedge funds in our database with MXL positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as China Lodging Group, Ltd (ADR) (NASDAQ:HTHT), HudBay Minerals Inc Ord Shs (NYSE:HBM), and Emergent Biosolutions Inc (NYSE:EBS) to gather more data points.
Follow Maxlinear Inc (NYSE:MXL)
Follow Maxlinear Inc (NYSE:MXL)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
Carol Gauthier/Shutterstock.com
What have hedge funds been doing with MaxLinear, Inc. (NYSE:MXL)?
At Q3’s end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, an 8% dip from the previous quarter. Hedge fund ownership has trended down in 2016 after nearly reaching 30 at the end of 2015. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Israel Englander’s Millennium Management has the most valuable position in MaxLinear, Inc. (NYSE:MXL), worth close to $32 million. On Millennium Management’s heels is Whale Rock Capital Management, led by Alex Sacerdote, holding a $29.7 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Joel Greenblatt’s Gotham Asset Management and Chuck Royce’s Royce & Associates.
Due to the fact that MaxLinear, Inc. (NYSE:MXL) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there is a sect of hedgies who sold off their full holdings in the third quarter. At the top of the heap, Principal Global Investors’ Columbus Circle Investors dumped the largest position of all the hedgies tracked by Insider Monkey, worth about $17.8 million in stock. Richard Driehaus’ fund, Driehaus Capital, also cut its stock, about $7.9 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to MaxLinear, Inc. (NYSE:MXL). We will take a look at China Lodging Group, Ltd (ADR) (NASDAQ:HTHT), HudBay Minerals Inc Ord Shs (NYSE:HBM), Emergent Biosolutions Inc (NYSE:EBS), and 8Point3 Energy Partners LP (NASDAQ:CAFD). This group of stocks’ market caps are similar to MXL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| HTHT | 16 | 118561 | 1 |
| HBM | 9 | 88043 | -3 |
| EBS | 14 | 135032 | -3 |
| CAFD | 12 | 47538 | 4 |
As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $97 million. That figure was $170 million in MXL’s case. China Lodging Group, Ltd (ADR) (NASDAQ:HTHT) is the most popular stock in this table. On the other hand HudBay Minerals Inc Ord Shs (NYSE:HBM) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks MaxLinear, Inc. (NYSE:MXL) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
