Monolithic Power Systems (MPWR): Hedge Funds Taking Some Chips Off The Table

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Monolithic Power Systems, Inc. (NASDAQ:MPWR).

Is Monolithic Power Systems, Inc. (NASDAQ:MPWR) worth your attention right now? Hedge funds are getting less bullish. The number of long hedge fund positions went down by 4 recently. Our calculations also showed that MPWR 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). MPWR was in 23 hedge funds’ portfolios at the end of the first quarter of 2020. There were 27 hedge funds in our database with MPWR positions at the end of the previous quarter.

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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Rajiv Jain of GQG Partners

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the latest hedge fund action surrounding Monolithic Power Systems, Inc. (NASDAQ:MPWR).

How are hedge funds trading Monolithic Power Systems, Inc. (NASDAQ:MPWR)?

At the end of the first quarter, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in MPWR a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, GQG Partners was the largest shareholder of Monolithic Power Systems, Inc. (NASDAQ:MPWR), with a stake worth $107.4 million reported as of the end of September. Trailing GQG Partners was Whale Rock Capital Management, which amassed a stake valued at $76.7 million. Cavalry Asset Management, Citadel Investment Group, and Adage Capital 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 Cavalry Asset Management allocated the biggest weight to Monolithic Power Systems, Inc. (NASDAQ:MPWR), around 5% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, earmarking 1.69 percent of its 13F equity portfolio to MPWR.

Judging by the fact that Monolithic Power Systems, Inc. (NASDAQ:MPWR) has faced bearish sentiment from the smart money, it’s safe to say that there was a specific group of hedgies who were dropping their entire stakes last quarter. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital sold off the largest position of the “upper crust” of funds watched by Insider Monkey, comprising about $8.5 million in stock, and Kevin Cottrell and Chris LaSusa’s KCL Capital was right behind this move, as the fund said goodbye to about $7.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 4 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to Monolithic Power Systems, Inc. (NASDAQ:MPWR). We will take a look at Peloton Interactive, Inc. (NASDAQ:PTON), Weibo Corp (NASDAQ:WB), Huntington Ingalls Industries Inc (NYSE:HII), and Logitech International SA (NASDAQ:LOGI). All of these stocks’ market caps resemble MPWR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $360 million. That figure was $390 million in MPWR’s case. Peloton Interactive, Inc. (NASDAQ:PTON) is the most popular stock in this table. On the other hand Weibo Corp (NASDAQ:WB) is the least popular one with only 10 bullish hedge fund positions. Monolithic Power Systems, Inc. (NASDAQ:MPWR) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on MPWR as the stock returned 37.3% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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