Legendary investors such as Jeffrey Talpins and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Silicon Motion Technology Corp. (NASDAQ:SIMO) from the perspective of those elite funds.
Silicon Motion Technology Corp. (NASDAQ:SIMO) has seen an increase in support from the world’s most elite money managers lately. SIMO was in 17 hedge funds’ portfolios at the end of December. There were 16 hedge funds in our database with SIMO holdings at the end of the previous quarter. Our calculations also showed that SIMO 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.
We’re going to take a look at the latest hedge fund action encompassing Silicon Motion Technology Corp. (NASDAQ:SIMO).
How are hedge funds trading Silicon Motion Technology Corp. (NASDAQ:SIMO)?
Heading into the first quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in SIMO over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Cardinal Capital was the largest shareholder of Silicon Motion Technology Corp. (NASDAQ:SIMO), with a stake worth $58 million reported as of the end of December. Trailing Cardinal Capital was Citadel Investment Group, which amassed a stake valued at $37.7 million. Yiheng Capital, Royce & Associates, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names have been driving this bullishness. Yiheng Capital, managed by Jonathan Guo, established the largest position in Silicon Motion Technology Corp. (NASDAQ:SIMO). Yiheng Capital had $28.3 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also initiated a $10 million position during the quarter. The following funds were also among the new SIMO investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, D. E. Shaw’s D E Shaw, and Jim Simons’s Renaissance Technologies.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Silicon Motion Technology Corp. (NASDAQ:SIMO) but similarly valued. We will take a look at Studio City International Holdings Limited (NYSE:MSC), American Axle & Manufacturing Holdings, Inc. (NYSE:AXL), WAVE Life Sciences Ltd. (NASDAQ:WVE), and Kearny Financial Corp. (NASDAQ:KRNY). This group of stocks’ market caps are similar to SIMO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MSC | 5 | 196463 | 5 |
| AXL | 24 | 124082 | -1 |
| WVE | 21 | 492122 | -1 |
| KRNY | 15 | 173642 | -2 |
| Average | 16.25 | 246577 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $247 million. That figure was $195 million in SIMO’s case. American Axle & Manufacturing Holdings, Inc. (NYSE:AXL) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 5 bullish hedge fund positions. Silicon Motion Technology Corp. (NASDAQ:SIMO) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on SIMO, though not to the same extent, as the stock returned 22.9% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
