Smart Money Pouring Into Applied Optoelectronics Inc (AAOI)

The 700+ hedge funds and money managers tracked by Insider Monkey have compiled and submitted their 13F filings for the third quarter, which unveiled their equity positions as of September 30. We went through these filings and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Applied Optoelectronics Inc (NASDAQ:AAOI).

Is Applied Optoelectronics Inc (NASDAQ:AAOI) a healthy stock for your portfolio? Investors who are in the know are turning quite bullish. The number of bullish hedge fund bets increased by 7 in Q3. Applied Optoelectronics Inc was in 20 hedge funds’ portfolios at the end of September. There were 13 hedge funds in our database with Applied Optoelectronics Inc holdings at the end of the quarter prior to that. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Stone Energy Corporation (NYSE:SGY), Sonus Networks, Inc. (NASDAQ:SONS), and Sinovac Biotech Ltd. (NASDAQ:SVA) to gather more data points.

If you’d ask most market participants, hedge funds are perceived as underperforming, old investment vehicles of years past. While there are more than 8,000 funds trading at present, our experts choose to focus on the moguls of this group, approximately 700 funds. It is estimated that this group of investors preside over most of all hedge funds’ total asset base, and by observing their highest performing investments, Insider Monkey has unsheathed a few investment strategies that have historically outperformed Mr. Market. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Keeping this in mind, let’s take a peek at the recent action encompassing Applied Optoelectronics Inc (NASDAQ:AAOI).

How are hedge funds trading Applied Optoelectronics Inc (NASDAQ:AAOI)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 54% jump from the second quarter. With hedgies’ capital changing hands, there exists a few key hedge fund managers who were upping their holdings meaningfully (or had already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Philip Hempleman’s Ardsley Partners has the biggest position in Applied Optoelectronics Inc (NASDAQ:AAOI), worth close to $16.1 million, amounting to 3.9% of its total 13F portfolio. The second-largest stake is held by Whale Rock Capital Management, managed by Alex Sacerdote, which holds a $15.2 million position; 1.5% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors with similar optimism include Remy Trafelet’s Trafelet Capital, Bernard Selz’s Selz Capital, and Josh Goldberg’s G2 Investment Partners Management.

Now, key money managers have jumped into Applied Optoelectronics Inc (NASDAQ:AAOI) headfirst. Whale Rock Capital Management created the most valuable position in Applied Optoelectronics Inc (NASDAQ:AAOI). George McCabe’s Portolan Capital Management also made a $3.1 million investment in the stock during the quarter. The following funds were also among the new Applied Optoelectronics Inc investors: Renaissance Technologies, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Israel Englander’s Millennium Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Applied Optoelectronics Inc (NASDAQ:AAOI) but similarly valued. We will take a look at Stone Energy Corporation (NYSE:SGY), Sonus Networks, Inc. (NASDAQ:SONS), Sinovac Biotech Ltd. (NASDAQ:SVA), and United Insurance Holdings Corp.(NDA) (NASDAQ:UIHC). This group of stocks’ market values are similar to Applied Optoelectronics Inc’s market value.

As you can see these stocks had an average of 11.75 hedge funds with bullish positions and the average amount invested in these stocks was $27 million. That figure was $78 million in Applied Optoelectronics Inc’s case. Stone Energy Corporation (NYSE:SGY) is the most popular stock in this table. On the other hand Sinovac Biotech Ltd. (NASDAQ:SVA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Applied Optoelectronics Inc (NASDAQ:AAOI) is more popular among hedge funds and has more money invested in it. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.