NXP Semiconductors NV (NXPI): Are Hedge Funds Right About This Stock?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the government. The 13F filings show the funds’ and investors’ portfolio positions as of March 31. In this article we look at what those investors think of NXP Semiconductors NV (NASDAQ:NXPI).

NXP Semiconductors NV (NASDAQ:NXPI) was in 52 hedge funds’ portfolios at the end of the first quarter of 2016. NXPI has actually experienced an increase in hedge fund interest lately. There were 50 hedge funds in our database with NXPI positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as TransCanada Corporation (USA) (NYSE:TRP), Credit Suisse Group AG (ADR) (NYSE:CS), and Baxalta Inc (NYSE:BXLT) to gather more data points.

In the eyes of most investors, hedge funds are assumed to be unimportant, outdated financial vehicles of yesteryear. While there are greater than 8000 funds with their doors open at the moment, Our experts look at the elite of this group, about 700 funds. These hedge fund managers administer the majority of the hedge fund industry’s total asset base, and by keeping an eye on their top investments, Insider Monkey has revealed many investment strategies that have historically beaten Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points per year for a decade in our back tests.

Before going into the details of hedge fund activity, we are going to take a look at recent comments by Nomura’s Romit Shah who believes NXP will ultimately be acquired. Here is what he said:

“In thisreport, we provide our rationale for NXPI as an acquisition candidate and EPS accretion analysis for BRCM, QCOM andTXN. We believe investors should be long NXPI for EPS growth; per our estimation, EPS will increase from $5.50-6.00in CY16 to $9.00-10.00 in CY18. If management executes, we believe the implied valuation discrepancy between NXP(9x) and comps (14-15x) is unsustainable. While the earnings growth profile positions NXPI to consistently outperform,we believe consolidation is a more immediate catalyst. We believe that NXP stands out to large-cap suppliers such asBroadcom, Qualcomm and Texas Instruments that might be considering transformational acquisitions. As we evaluatethe main criteria for acquisitions over the past year, NXP checks all the boxes: (1) Scale: NXPI is the fifth largestsupplier by revenue; (2) Earnings accretion (~10-30%) based on operating leverage, interest expense and NOLs; (3)TAM expansion: 40% of sales are from automotive; (4) Distribution: NXPI has a significant presence in worldwidechannels, which is valuable from a crossselling perspective; (5) Strategic: NXPI is the market leader in several areas,including secure identification, MCUs, and mobile transactions.”

Romit Shah rates NXP a buy and has a price target of $100. Now, let’s check out the recent hedge fund action regarding NXP Semiconductors NV (NASDAQ:NXPI).

How are hedge funds trading NXP Semiconductors NV (NASDAQ:NXPI)?

At Q1’s end, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 4% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Soroban Capital Partners, managed by Eric W. Mandelblatt, holds the most valuable position in NXP Semiconductors NV (NASDAQ:NXPI). Soroban Capital Partners has a $384.5 million position in the stock, comprising 3.1% of its 13F portfolio. Coming in second is David Gallo of Valinor Management LLC, with a $146.7 million position; the fund has 4.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions contain Israel Englander’s Millennium Management, Ken Griffin’s Citadel Investment Group and Legg Mason Capital Management.

Now, specific money managers have jumped into NXP Semiconductors NV (NASDAQ:NXPI) headfirst. Point72 Asset Management, managed by Steve Cohen, assembled the most outsized position in NXP Semiconductors NV (NASDAQ:NXPI). Point72 Asset Management had $48.2 million invested in the company at the end of the quarter. Ken Fisher’s Fisher Asset Management also initiated a $47.9 million position during the quarter. The other funds with brand new NXPI positions are Josh Resnick’s Jericho Capital Asset Management, Nick Niell’s Arrowgrass Capital Partners, and Eli Cohen’s Crescent Park Management.

Let’s also examine hedge fund activity in other stocks similar to NXP Semiconductors NV (NASDAQ:NXPI). We will take a look at TransCanada Corporation (USA) (NYSE:TRP), Credit Suisse Group AG (ADR) (NYSE:CS), Baxalta Inc (NYSE:BXLT), and V.F. Corporation (NYSE:VFC). This group of stocks’ market caps are closest to NXPI’s market cap.

As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $1778 million. That figure was $1647 million in NXPI’s case. Baxalta Inc (NYSE:BXLT) is the most popular stock in this table. On the other hand Credit Suisse Group AG (ADR) (NYSE:CS) is the least popular one with only 10 bullish hedge fund positions. NXP Semiconductors NV (NASDAQ:NXPI) is not the most popular stock in this group but hedge fund interest is still way above average. It seems like hedge funds also believe that NXP is undervalued and may be a takeover candidate.