Last year we predicted the arrival of the first US recession since 2009 and we told in advance that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). 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 Semtech Corporation (NASDAQ:SMTC).
Is Semtech Corporation (NASDAQ:SMTC) undervalued? Money managers were betting on the stock. The number of bullish hedge fund bets improved by 4 lately. Semtech Corporation (NASDAQ:SMTC) was in 21 hedge funds’ portfolios at the end of March. The all time high for this statistic is 25. Our calculations also showed that SMTC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 17 hedge funds in our database with SMTC positions at the end of the fourth quarter.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
Ian Wace of Marshall Wace
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. Keeping this in mind let’s take a peek at the key hedge fund action encompassing Semtech Corporation (NASDAQ:SMTC).
Do Hedge Funds Think SMTC Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 24% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards SMTC over the last 23 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Fisher Asset Management held the most valuable stake in Semtech Corporation (NASDAQ:SMTC), which was worth $80.9 million at the end of the fourth quarter. On the second spot was Arrowstreet Capital which amassed $29.3 million worth of shares. Millennium Management, Woodline Partners, 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 Washington Harbour Partners allocated the biggest weight to Semtech Corporation (NASDAQ:SMTC), around 1.07% of its 13F portfolio. Woodline Partners is also relatively very bullish on the stock, setting aside 0.31 percent of its 13F equity portfolio to SMTC.
Now, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, established the largest position in Semtech Corporation (NASDAQ:SMTC). Millennium Management had $25.4 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $2.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Brandon Haley’s Holocene Advisors, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Karim Abbadi and Edward McBride’s Centiva Caiptal.
Let’s check out hedge fund activity in other stocks similar to Semtech Corporation (NASDAQ:SMTC). These stocks are Open Lending Corporation (NASDAQ:LPRO), Sonos, Inc. (NASDAQ:SONO), Qurate Retail, Inc. (NASDAQ:QRTEA), Home Bancshares Inc (NASDAQ:HOMB), Inovalon Holdings Inc (NASDAQ:INOV), Highwoods Properties Inc (NYSE:HIW), and Ortho Clinical Diagnostics Holdings plc (NASDAQ:OCDX). This group of stocks’ market values match SMTC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LPRO | 33 | 511506 | -1 |
| SONO | 46 | 763124 | 3 |
| QRTEA | 31 | 776294 | -5 |
| HOMB | 6 | 48515 | -6 |
| INOV | 17 | 108170 | -5 |
| HIW | 20 | 117413 | -1 |
| OCDX | 23 | 328347 | 23 |
| Average | 25.1 | 379053 | 1.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 25.1 hedge funds with bullish positions and the average amount invested in these stocks was $379 million. That figure was $210 million in SMTC’s case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand Home Bancshares Inc (NASDAQ:HOMB) is the least popular one with only 6 bullish hedge fund positions. Semtech Corporation (NASDAQ:SMTC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SMTC is 53. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately SMTC wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SMTC investors were disappointed as the stock returned -11.7% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Semtech Corp (NASDAQ:SMTC)
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Disclosure: None. This article was originally published at Insider Monkey.
