Should I Avoid Coherent, Inc. (COHR)?

In this article we are going to use hedge fund sentiment as a tool and determine whether Coherent, Inc. (NASDAQ:COHR) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Is Coherent, Inc. (NASDAQ:COHR) ready to rally soon? Investors who are in the know were in a bearish mood. The number of bullish hedge fund bets retreated by 6 recently. Coherent, Inc. (NASDAQ:COHR) was in 37 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 43. Our calculations also showed that COHR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 43 hedge funds in our database with COHR holdings at the end of June.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Now we’re going to take a look at the recent hedge fund action surrounding Coherent, Inc. (NASDAQ:COHR).

Matthew Halbower of Pentwater Capital

Do Hedge Funds Think COHR Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards COHR over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Pentwater Capital Management, managed by Matthew Halbower, holds the biggest position in Coherent, Inc. (NASDAQ:COHR). Pentwater Capital Management has a $384.1 million position in the stock, comprising 3.9% of its 13F portfolio. The second most bullish fund manager is Magnetar Capital, managed by Alec Litowitz and Ross Laser, which holds a $167.9 million position; 1.7% of its 13F portfolio is allocated to the stock. Other professional money managers that hold long positions include Robert Emil Zoellner’s Alpine Associates, John Orrico’s Water Island Capital and Simon Davies’s Sand Grove Capital Partners. In terms of the portfolio weights assigned to each position Havens Advisors allocated the biggest weight to Coherent, Inc. (NASDAQ:COHR), around 9.91% of its 13F portfolio. Sand Grove Capital Partners is also relatively very bullish on the stock, earmarking 9.1 percent of its 13F equity portfolio to COHR.

Seeing as Coherent, Inc. (NASDAQ:COHR) has experienced falling interest from hedge fund managers, it’s easy to see that there lies a certain “tier” of fund managers that decided to sell off their entire stakes in the third quarter. It’s worth mentioning that Matthew Moskey and Friedrich Schulte-Hillen’s Athos Capital sold off the largest investment of the 750 funds tracked by Insider Monkey, totaling about $10.2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $10.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 6 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Coherent, Inc. (NASDAQ:COHR) but similarly valued. We will take a look at Paycor HCM Inc. (NASDAQ:PYCR), Cricut, Inc. (NASDAQ:CRCT), RBC Bearings Incorporated (NASDAQ:ROLL), CoreSite Realty Corp (NYSE:COR), Ultragenyx Pharmaceutical Inc (NASDAQ:RARE), Amkor Technology, Inc. (NASDAQ:AMKR), and STAAR Surgical Company (NASDAQ:STAA). All of these stocks’ market caps are closest to COHR’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.6 hedge funds with bullish positions and the average amount invested in these stocks was $420 million. That figure was $1464 million in COHR’s case. STAAR Surgical Company (NASDAQ:STAA) is the most popular stock in this table. On the other hand Paycor HCM Inc. (NASDAQ:PYCR) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Coherent, Inc. (NASDAQ:COHR) is more popular among hedge funds. Our overall hedge fund sentiment score for COHR is 74.8. 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 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately COHR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on COHR were disappointed as the stock returned 3.5% since the end of the third quarter (through 11/30) 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 since 2019.

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