Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
KLA-Tencor Corporation (NASDAQ:KLAC) has seen an increase in hedge fund interest lately. KLAC was in 27 hedge funds’ portfolios at the end of September. There were 26 hedge funds in our database with KLAC holdings at the end of the previous quarter. Our calculations also showed that klac 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 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 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.
Let’s check out the fresh hedge fund action surrounding KLA-Tencor Corporation (NASDAQ:KLAC).
What have hedge funds been doing with KLA-Tencor Corporation (NASDAQ:KLAC)?
At Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from one quarter earlier. On the other hand, there were a total of 31 hedge funds with a bullish position in KLAC at the beginning of this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in KLA-Tencor Corporation (NASDAQ:KLAC), which was worth $166.9 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $140.9 million worth of shares. Moreover, Millennium Management, Two Sigma Advisors, and D E Shaw were also bullish on KLA-Tencor Corporation (NASDAQ:KLAC), allocating a large percentage of their portfolios to this stock.
As aggregate interest increased, key hedge funds have jumped into KLA-Tencor Corporation (NASDAQ:KLAC) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, created the biggest position in KLA-Tencor Corporation (NASDAQ:KLAC). PEAK6 Capital Management had $4.5 million invested in the company at the end of the quarter. Matthew Tewksbury’s Stevens Capital Management also initiated a $3.8 million position during the quarter. The only other fund with a brand new KLAC position is David Andre and Astro Teller’s Cerebellum Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as KLA-Tencor Corporation (NASDAQ:KLAC) but similarly valued. These stocks are Loews Corporation (NYSE:L), Tiffany & Co. (NYSE:TIF), Banco de Chile (NYSE:BCH), and MSCI Inc (NYSE:MSCI). This group of stocks’ market values are similar to KLAC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| L | 24 | 423464 | 5 |
| TIF | 43 | 1695941 | 0 |
| BCH | 2 | 73234 | -2 |
| MSCI | 36 | 768186 | 6 |
| Average | 26.25 | 740206 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $740 million. That figure was $909 million in KLAC’s case. Tiffany & Co. (NYSE:TIF) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 2 bullish hedge fund positions. KLA-Tencor Corporation (NASDAQ:KLAC) 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. In this regard TIF might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
