Should I Buy Silicon Motion Technology Corp. (SIMO)?

The Insider Monkey team has completed processing the quarterly 13F filings for the March quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Silicon Motion Technology Corp. (NASDAQ:SIMO).

Silicon Motion Technology Corp. (NASDAQ:SIMO) has seen an increase in activity from the world’s largest hedge funds in recent months. Silicon Motion Technology Corp. (NASDAQ:SIMO) was in 24 hedge funds’ portfolios at the end of March. The all time high for this statistic is 29. There were 18 hedge funds in our database with SIMO holdings at the end of December. Our calculations also showed that SIMO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Gavin Saitowitz of Prelude Capital

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. With all of this in mind let’s take a glance at the fresh hedge fund action regarding Silicon Motion Technology Corp. (NASDAQ:SIMO).

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

At the end of March, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from the fourth quarter of 2020. By comparison, 18 hedge funds held shares or bullish call options in SIMO a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Silicon Motion Technology Corp. (NASDAQ:SIMO) was held by Cardinal Capital, which reported holding $166.5 million worth of stock at the end of December. It was followed by Yiheng Capital with a $78.7 million position. Other investors bullish on the company included GLG Partners, Millennium Management, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Cardinal Capital allocated the biggest weight to Silicon Motion Technology Corp. (NASDAQ:SIMO), around 4.07% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, dishing out 3.57 percent of its 13F equity portfolio to SIMO.

Now, key money managers have been driving this bullishness. GLG Partners, managed by Noam Gottesman, initiated the most outsized position in Silicon Motion Technology Corp. (NASDAQ:SIMO). GLG Partners had $33.7 million invested in the company at the end of the quarter. John Hurley’s Cavalry Asset Management also initiated a $24.2 million position during the quarter. The other funds with new positions in the stock are Joe DiMenna’s ZWEIG DIMENNA PARTNERS, Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital), and D. E. Shaw’s D E Shaw.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Silicon Motion Technology Corp. (NASDAQ:SIMO) but similarly valued. These stocks are Four Corners Property Trust, Inc. (NYSE:FCPT), Lordstown Motors Corp. (NASDAQ:RIDE), Crestwood Equity Partners LP (NYSE:CEQP), Cavco Industries, Inc. (NASDAQ:CVCO), Bally’s Corporation (NYSE:BALY), NetScout Systems, Inc. (NASDAQ:NTCT), and TPI Composites, Inc. (NASDAQ:TPIC). This group of stocks’ market caps resemble SIMO’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $448 million in SIMO’s case. Cavco Industries, Inc. (NASDAQ:CVCO) is the most popular stock in this table. On the other hand Crestwood Equity Partners LP (NYSE:CEQP) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Silicon Motion Technology Corp. (NASDAQ:SIMO) is more popular among hedge funds. Our overall hedge fund sentiment score for SIMO is 84.8. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately SIMO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SIMO were disappointed as the stock returned 3.6% since the end of the first quarter (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 since 2019.

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