At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards NXP Semiconductors NV (NASDAQ:NXPI) at the end of the second quarter and determine whether the smart money was really smart about this stock.
NXP Semiconductors NV (NASDAQ:NXPI) was in 67 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 93. NXPI investors should be aware of an increase in enthusiasm from smart money lately. There were 52 hedge funds in our database with NXPI holdings at the end of March. Our calculations also showed that NXPI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.
In the eyes of most traders, hedge funds are viewed as slow, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation today, Our researchers hone in on the aristocrats of this club, approximately 850 funds. These investment experts administer most of the smart money’s total asset base, and by watching their matchless stock picks, Insider Monkey has come up with various investment strategies that have historically exceeded Mr. Market. Insider Monkey’s flagship short hedge fund strategy defeated the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .
Ken Fisher of Fisher Asset Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding NXP Semiconductors NV (NASDAQ:NXPI).
How have hedgies been trading NXP Semiconductors NV (NASDAQ:NXPI)?
At the end of the second quarter, a total of 67 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 29% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in NXPI over the last 20 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Whale Rock Capital Management was the largest shareholder of NXP Semiconductors NV (NASDAQ:NXPI), with a stake worth $296.1 million reported as of the end of September. Trailing Whale Rock Capital Management was Citadel Investment Group, which amassed a stake valued at $233.3 million. Point72 Asset Management, Point State Capital, and Fisher Asset 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 Mountain Road Advisors allocated the biggest weight to NXP Semiconductors NV (NASDAQ:NXPI), around 7.23% of its 13F portfolio. Sessa Capital is also relatively very bullish on the stock, dishing out 6.7 percent of its 13F equity portfolio to NXPI.
As aggregate interest increased, key money managers were leading the bulls’ herd. Whale Rock Capital Management, managed by Alex Sacerdote, created the most valuable position in NXP Semiconductors NV (NASDAQ:NXPI). Whale Rock Capital Management had $296.1 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also made a $124.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, David Fiszel’s Honeycomb Asset Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NXP Semiconductors NV (NASDAQ:NXPI) but similarly valued. These stocks are DocuSign, Inc. (NASDAQ:DOCU), Splunk Inc (NASDAQ:SPLK), Orange SA (NYSE:ORAN), Phillips 66 (NYSE:PSX), Mizuho Financial Group Inc. (NYSE:MFG), O’Reilly Automotive Inc (NASDAQ:ORLY), and Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC). This group of stocks’ market valuations match NXPI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DOCU | 57 | 2585727 | 10 |
| SPLK | 49 | 874330 | 12 |
| ORAN | 3 | 6480 | -2 |
| PSX | 42 | 362906 | -1 |
| MFG | 8 | 17393 | 2 |
| ORLY | 61 | 2930519 | 1 |
| ERIC | 23 | 400790 | 3 |
| Average | 34.7 | 1025449 | 3.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.7 hedge funds with bullish positions and the average amount invested in these stocks was $1025 million. That figure was $2215 million in NXPI’s case. O’Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks NXP Semiconductors NV (NASDAQ:NXPI) is more popular among hedge funds. Our overall hedge fund sentiment score for NXPI is 81.6. 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 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 28.2% in 2020 through August 24th and still beat the market by 20.6 percentage points. Unfortunately NXPI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on NXPI were disappointed as the stock returned 8.5% since the end of the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Follow Nxp Semiconductors N.v. (NASDAQ:NXPI)
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Disclosure: None. This article was originally published at Insider Monkey.
