Is MPWR Stock A Buy or Sell?

Is Monolithic Power Systems, Inc. (NASDAQ:MPWR) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is MPWR stock a buy? Monolithic Power Systems, Inc. (NASDAQ:MPWR) was in 30 hedge funds’ portfolios at the end of December. The all time high for this statistic is 37. MPWR has experienced a decrease in support from the world’s most elite money managers of late. There were 37 hedge funds in our database with MPWR holdings at the end of September. Our calculations also showed that MPWR isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

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, we heard that billionaire Peter Thiel is backing this psychedelic-drug startup. So, we are taking a closer look at this space. We go through lists like the 10 best biotech stocks under $10 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. With all of this in mind we’re going to check out the fresh hedge fund action surrounding Monolithic Power Systems, Inc. (NASDAQ:MPWR).

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

At the end of December, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the previous quarter. By comparison, 27 hedge funds held shares or bullish call options in MPWR a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Ian Simm’s Impax Asset Management has the biggest position in Monolithic Power Systems, Inc. (NASDAQ:MPWR), worth close to $113 million, comprising 0.7% of its total 13F portfolio. Sitting at the No. 2 spot is Alex Sacerdote of Whale Rock Capital Management, with a $97.1 million position; the fund has 0.6% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism contain John Hurley’s Cavalry Asset Management, Brian Ashford-Russell and Tim Woolley’s Polar Capital and Rajiv Jain’s GQG Partners. In terms of the portfolio weights assigned to each position Cavalry Asset Management allocated the biggest weight to Monolithic Power Systems, Inc. (NASDAQ:MPWR), around 5.93% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, designating 1.84 percent of its 13F equity portfolio to MPWR.

Due to the fact that Monolithic Power Systems, Inc. (NASDAQ:MPWR) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there exists a select few fund managers who were dropping their full holdings by the end of the fourth quarter. Interestingly, Renaissance Technologies dumped the biggest position of all the hedgies followed by Insider Monkey, comprising an estimated $45.9 million in stock. Ben Levine, Andrew Manuel and Stefan Renold’s fund, LMR Partners, also dumped its stock, about $7.5 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 7 funds by the end of the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to Monolithic Power Systems, Inc. (NASDAQ:MPWR). We will take a look at The Liberty SiriusXM Group (NASDAQ:LSXMA), Carnival Corporation & plc (NYSE:CUK), Logitech International SA (NASDAQ:LOGI), Tractor Supply Company (NASDAQ:TSCO), Sun Communities Inc (NYSE:SUI), Solaredge Technologies Inc (NASDAQ:SEDG), and M&T Bank Corporation (NYSE:MTB). This group of stocks’ market valuations are similar to MPWR’s market valuation.

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As you can see these stocks had an average of 28.1 hedge funds with bullish positions and the average amount invested in these stocks was $695 million. That figure was $641 million in MPWR’s case. The Liberty SiriusXM Group (NASDAQ:LSXMA) is the most popular stock in this table. On the other hand Carnival Corporation & plc (NYSE:CUK) is the least popular one with only 7 bullish hedge fund positions. Monolithic Power Systems, Inc. (NASDAQ:MPWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MPWR is 55.2. 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. 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 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 12.2% in 2021 through April 12th and beat the market again by 1.5 percentage points. Unfortunately MPWR wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on MPWR were disappointed as the stock returned 2.3% since the end of December (through 4/12) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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