Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter. NASDAQ and Russell 2000 indices were already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points in the fourth quarter. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were paring back their overall exposure and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Photronics, Inc. (NASDAQ:PLAB).
Is Photronics, Inc. (NASDAQ:PLAB) a safe investment now? Investors who are in the know are getting more bullish. The number of long hedge fund positions advanced by 2 recently. Our calculations also showed that PLAB isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to go over the fresh hedge fund action encompassing Photronics, Inc. (NASDAQ:PLAB).
What does the smart money think about Photronics, Inc. (NASDAQ:PLAB)?
Heading into the first quarter of 2019, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards PLAB over the last 14 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Photronics, Inc. (NASDAQ:PLAB), with a stake worth $18.5 million reported as of the end of December. Trailing Renaissance Technologies was D E Shaw, which amassed a stake valued at $12.1 million. Royce & Associates, Divisar Capital, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, specific money managers were breaking ground themselves. Divisar Capital, managed by Steven Baughman, assembled the largest position in Photronics, Inc. (NASDAQ:PLAB). Divisar Capital had $8.7 million invested in the company at the end of the quarter. Noam Gottesman’s GLG Partners also made a $7.4 million investment in the stock during the quarter. The other funds with brand new PLAB positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Noam Gottesman’s GLG Partners, and Minhua Zhang’s Weld Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Photronics, Inc. (NASDAQ:PLAB) but similarly valued. We will take a look at Resolute Energy Corp (NYSE:REN), Ameresco Inc (NYSE:AMRC), Weidai Ltd. (NYSE:WEI), and Noble Corporation plc (NYSE:NE). All of these stocks’ market caps are similar to PLAB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| REN | 11 | 148750 | 1 |
| AMRC | 7 | 23236 | -3 |
| WEI | 1 | 429 | 1 |
| NE | 24 | 100303 | 3 |
| Average | 10.75 | 68180 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $70 million in PLAB’s case. Noble Corporation plc (NYSE:NE) is the most popular stock in this table. On the other hand Weidai Ltd. (NYSE:WEI) is the least popular one with only 1 bullish hedge fund positions. Photronics, Inc. (NASDAQ:PLAB) 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 PLAB wasn’t nearly as popular as these 15 stock and hedge funds that were betting on PLAB were disappointed as the stock returned -5% 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.
