Is TSEM A Good Stock To Buy Now?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Tower Semiconductor Ltd. (NASDAQ:TSEM).

Is TSEM a good stock to buy now? Tower Semiconductor Ltd. (NASDAQ:TSEM) was in 14 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 26. TSEM shareholders have witnessed a decrease in hedge fund sentiment lately. There were 15 hedge funds in our database with TSEM holdings at the end of June. Our calculations also showed that TSEM isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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. Now we’re going to take a glance at the recent hedge fund action surrounding Tower Semiconductor Ltd. (NASDAQ:TSEM).

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

At the end of September, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards TSEM over the last 21 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, Rima Senvest Management was the largest shareholder of Tower Semiconductor Ltd. (NASDAQ:TSEM), with a stake worth $139.5 million reported as of the end of September. Trailing Rima Senvest Management was Shelter Haven Capital Management, which amassed a stake valued at $38.8 million. D E Shaw, Parsifal Capital Management, and Renaissance Technologies were 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 Shelter Haven Capital Management allocated the biggest weight to Tower Semiconductor Ltd. (NASDAQ:TSEM), around 17.17% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, setting aside 7.91 percent of its 13F equity portfolio to TSEM.

Since Tower Semiconductor Ltd. (NASDAQ:TSEM) has witnessed a decline in interest from hedge fund managers, logic holds that there is a sect of hedge funds that slashed their positions entirely in the third quarter. It’s worth mentioning that Paul Marshall and Ian Wace’s Marshall Wace LLP said goodbye to the largest position of the “upper crust” of funds followed by Insider Monkey, comprising close to $2.4 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund cut about $0.3 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 1 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Tower Semiconductor Ltd. (NASDAQ:TSEM) but similarly valued. We will take a look at Olin Corporation (NYSE:OLN), Eidos Therapeutics, Inc. (NASDAQ:EIDX), Main Street Capital Corporation (NYSE:MAIN), Allegiant Travel Company (NASDAQ:ALGT), Cimpress plc (NASDAQ:CMPR), Inovio Pharmaceuticals Inc (NASDAQ:INO), and Moelis & Company (NYSE:MC). All of these stocks’ market caps are similar to TSEM’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.3 hedge funds with bullish positions and the average amount invested in these stocks was $209 million. That figure was $296 million in TSEM’s case. Olin Corporation (NYSE:OLN) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 4 bullish hedge fund positions. Tower Semiconductor Ltd. (NASDAQ:TSEM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TSEM is 37.4. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on TSEM as the stock returned 46.9% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.

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