At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards SiTime Corporation (NASDAQ:SITM).
Is SiTime Corporation (NASDAQ:SITM) an outstanding investment today? Investors who are in the know are getting less optimistic. The number of bullish hedge fund positions dropped by 1 lately. Our calculations also showed that SITM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). SITM was in 3 hedge funds’ portfolios at the end of the first quarter of 2020. There were 4 hedge funds in our database with SITM holdings at the end of the previous quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 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.
John Overdeck of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, legendary investor Bill Miller told investors to sell 7 extremely popular recession stocks last month. So, we went through his list and recommended another stock with 100% upside potential instead. We interview hedge fund managers and ask them about their best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the fresh hedge fund action encompassing SiTime Corporation (NASDAQ:SITM).
What have hedge funds been doing with SiTime Corporation (NASDAQ:SITM)?
At the end of the first quarter, a total of 3 of the hedge funds tracked by Insider Monkey were long this stock, a change of -25% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SITM over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
More specifically, Driehaus Capital was the largest shareholder of SiTime Corporation (NASDAQ:SITM), with a stake worth $10.5 million reported as of the end of September. Trailing Driehaus Capital was Millennium Management, which amassed a stake valued at $1.2 million. Two Sigma Advisors was also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Driehaus Capital allocated the biggest weight to SiTime Corporation (NASDAQ:SITM), around 0.35% of its 13F portfolio. Millennium Management is also relatively very bullish on the stock, designating 0.0026 percent of its 13F equity portfolio to SITM.
Due to the fact that SiTime Corporation (NASDAQ:SITM) has witnessed a decline in interest from the smart money, it’s safe to say that there exists a select few hedge funds who were dropping their positions entirely last quarter. At the top of the heap, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors dropped the largest position of all the hedgies tracked by Insider Monkey, worth an estimated $5.4 million in stock. Gavin Saitowitz and Cisco J. del Valle’s fund, Springbok Capital, also dumped its stock, about $0 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as SiTime Corporation (NASDAQ:SITM) but similarly valued. These stocks are Allot Communications Ltd. (NASDAQ:ALLT), Consolidated Communications Holdings Inc (NASDAQ:CNSL), Camtek LTD. (NASDAQ:CAMT), and WAVE Life Sciences Ltd. (NASDAQ:WVE). All of these stocks’ market caps are similar to SITM’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALLT | 13 | 107352 | 3 |
| CNSL | 15 | 16767 | -1 |
| CAMT | 6 | 21349 | -3 |
| WVE | 10 | 114425 | -3 |
| Average | 11 | 64973 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $65 million. That figure was $12 million in SITM’s case. Consolidated Communications Holdings Inc (NASDAQ:CNSL) is the most popular stock in this table. On the other hand Camtek LTD. (NASDAQ:CAMT) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks SiTime Corporation (NASDAQ:SITM) is even less popular than CAMT. Hedge funds clearly dropped the ball on SITM as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. A small number of hedge funds were also right about betting on SITM as the stock returned 53.4% so far in the second quarter and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.