Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards KLA Corporation (NASDAQ:KLAC) to find out whether there were any major changes in hedge funds’ views.
Is KLA Corporation (NASDAQ:KLAC) worth your attention right now? Prominent investors were getting more optimistic. The number of long hedge fund positions inched up by 5 recently. KLA Corporation (NASDAQ:KLAC) was in 45 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 46. Our calculations also showed that KLAC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 40 hedge funds in our database with KLAC holdings at the end of March.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Israel Englander of Millennium Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. With all of this in mind let’s take a gander at the latest hedge fund action encompassing KLA Corporation (NASDAQ:KLAC).
Do Hedge Funds Think KLAC Is A Good Stock To Buy Now?
At the end of the second quarter, a total of 45 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards KLAC over the last 24 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, Alkeon Capital Management was the largest shareholder of KLA Corporation (NASDAQ:KLAC), with a stake worth $487.9 million reported as of the end of June. Trailing Alkeon Capital Management was Arrowstreet Capital, which amassed a stake valued at $208.1 million. AQR Capital Management, Woodline Partners, and Millennium Management 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 Mondrian Capital allocated the biggest weight to KLA Corporation (NASDAQ:KLAC), around 2.27% of its 13F portfolio. Woodline Partners is also relatively very bullish on the stock, setting aside 2.15 percent of its 13F equity portfolio to KLAC.
As industrywide interest jumped, key money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, established the most outsized position in KLA Corporation (NASDAQ:KLAC). Point72 Asset Management had $68.9 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $14.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Ray Dalio’s Bridgewater Associates, Benjamin A. Smith’s Laurion Capital Management, and Brian Ashford-Russell and Tim Woolley’s Polar Capital.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as KLA Corporation (NASDAQ:KLAC) but similarly valued. These stocks are America Movil SAB de CV (NYSE:AMX), América Móvil, S.A.B. de C.V. (NYSE:AMOV), Roper Technologies Inc. (NYSE:ROP), Palantir Technologies Inc. (NYSE:PLTR), Lululemon Athletica inc. (NASDAQ:LULU), Thomson Reuters Corporation (NYSE:TRI), and Johnson Controls International plc (NYSE:JCI). This group of stocks’ market valuations are closest to KLAC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMX | 13 | 114474 | -2 |
| AMOV | 1 | 256 | 0 |
| ROP | 41 | 1570401 | -1 |
| PLTR | 26 | 1361219 | -6 |
| LULU | 46 | 952983 | 5 |
| TRI | 27 | 354844 | -1 |
| JCI | 39 | 1270005 | -2 |
| Average | 27.6 | 803455 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $803 million. That figure was $1375 million in KLAC’s case. Lululemon Athletica inc. (NASDAQ:LULU) is the most popular stock in this table. On the other hand América Móvil, S.A.B. de C.V. (NYSE:AMOV) is the least popular one with only 1 bullish hedge fund positions. KLA Corporation (NASDAQ:KLAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KLAC is 88.2. 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. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on KLAC as the stock returned 3.7% since the end of Q2 (through 10/1) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Kla Corp (NASDAQ:KLAC)
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Disclosure: None. This article was originally published at Insider Monkey.
