Semiconductor devices manufacturer Qorvo Inc (NASDAQ:QRVO) issued weak guidance for the company’s fiscal second quarter of 2016 in the after-hours of trading yesterday, pushing shares down by 13.30% in pre-market trading this morning. According to the chipmaker’s statement, it expects to post earnings per share in the range of $1.05 – $1.15, on revenue of between $690 million and $710 million. Wall Street analysts expected the company to post earnings per share of $1.28 on revenue of $741.5 million for the second quarter, which ends in September. For the fiscal first quarter of 2016, which Qorvo Inc (NASDAQ:QRVO) also reported yesterday, the company posted earnings per share of $1.09, beating the analysts’ consensus estimate of $1.03. The revenue for the period was $673.60 million while analysts expected $664.73 million. The released guidance comes as a big surprise, as there is nothing unusual expected in the industry to warrant such a variation. Wall Street’s reaction is a clear indication that the guidance wasn’t expected. Qorvo Inc was formed in January of this year after a $1.55 billion merger between RF Micro Devices and TriQuint Semiconductor.
Going into the second quarter of 2015, a total of 29 hedge funds from our database were long in the stock, with aggregate investments valued at $793.48 million. During the first quarter, the stock managed to register a 13.21% gain, which was impressive, considering the industry has been slow. Qorvo Inc (NASDAQ:QRVO), however, couldn’t maintain that kind of performance in the second quarter, only pulling a 0.72% gain. It’s for this reason that a number of hedge funds may have opted out. However, an overall view of the stock shows that many hedge funds still remained bullish on the stock, and the company’s performance in the fiscal first quarter was vindication of hedge funds’ general bullish sentiment.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activities. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds underperformed because they aren’t 100% long. Hedge fund fees are also very large compared to the returns generated and they reduce the net returns experienced by investors. We uncovered that hedge funds’ long positions actually outperformed the market. For instance the 15 most popular small-cap stocks among funds beat the S&P 500 Index by more than 66 percentage points since the end of August 2012. These stocks returned a cumulative of 123.1% vs. 56.5% gain for the S&P 500 Index (read the details). That’s why we believe investors should pay attention to what hedge funds are buying (rather than what their net returns are).
Insider trading at Qorvo Inc (NASDAQ:QRVO) over the past three months was rather bearish, considering that there were 29 sales and no purchases. The sales involved 186,268 shares in total. In a transaction that occurred on July 1, the company’s CEO Robert A. Bruggeworth sold a total of 23,125 shares at an average of $79.77 per share. VP Steven E. Creviston is also reported to have sold a total of 10,000 shares on the same day.
Let’s now have a look at hedge fund activity relating to the stock.
How are hedge funds trading Qorvo Inc (NASDAQ:QRVO)?
AQR Capital Management, managed by Cliff Asness, is one of the funds tracked by Insider Monkey that was long in Qorvo Inc (NASDAQ:QRVO) at the end of the first quarter, owning 860,877 shares, having a market value of $68.61 million. The fund had 0.16% of its 13F portfolio invested in the stock. Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, held 250,097 shares of the stock valued at $19.93 million, representing 0.12% of its 13F portfolio value at the end of the first quarter. Some other hedge funds that had notable stakes in the stock at the end of the first quarter were Daniel Benton’s Andor Capital Management, and Ken Heebner’s Capital Growth Management. During the first quarter, only four funds reduced their positions in the stock, while one completely closed its position.
With the stock having been formed in January, the first quarter mainly consisted of funds creating new positions. The trend was, however, different in the second quarter with several hedge funds that have filed their 13Fs thus far having reduced their stakes. Fisher Asset Management, headed by billionaire Ken Fisher, was among the hedge funds that reduced their stakes in the stock during the second quarter, having cut its position by 672,825 shares. Overall, however, several big owners still remained bullish on the stock.
In conclusion, the company’s second quarter guidance gives a bleak picture of the stock. Hedge funds’ sentiment also doesn’t show the kind of confidence it portrayed in the first quarter of 2015. Insider Monkey concludes that Qorvo Inc (NASDAQ:QRVO) is not a good investment at the moment.
Disclosure: None
