Was The Smart Money Right About Analog Devices, Inc. (ADI)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th. Hedge funds’ consensus stock picks performed spectacularly over the last 3 years, but 2022 hasn’t been kind to hedge funds. In this article we look at how hedge funds traded Analog Devices, Inc. (NASDAQ:ADI) and determine whether the smart money was really smart about this stock.

Analog Devices, Inc. (NASDAQ:ADI) was in 74 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 62. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ADI shareholders have witnessed an increase in hedge fund interest in recent months. There were 62 hedge funds in our database with ADI positions at the end of the second quarter. Our calculations also showed that ADI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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. Keeping this in mind we’re going to take a peek at the latest hedge fund action surrounding Analog Devices, Inc. (NASDAQ:ADI).

David Blood of Generation Investment Management

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

At third quarter’s end, a total of 74 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the second quarter of 2021. By comparison, 52 hedge funds held shares or bullish call options in ADI 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.

When looking at the institutional investors followed by Insider Monkey, David Blood and Al Gore’s Generation Investment Management has the number one position in Analog Devices, Inc. (NASDAQ:ADI), worth close to $641.8 million, accounting for 2.7% of its total 13F portfolio. On Generation Investment Management’s heels is Cantillon Capital Management, led by William von Mueffling, holding a $570 million position; the fund has 3.9% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism encompass John Armitage’s Egerton Capital Limited, Eric W. Mandelblatt and Gaurav Kapadia’s Soroban Capital Partners and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC. In terms of the portfolio weights assigned to each position Glaxis Capital Management allocated the biggest weight to Analog Devices, Inc. (NASDAQ:ADI), around 14.08% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, dishing out 9.07 percent of its 13F equity portfolio to ADI.

As one would reasonably expect, key money managers have jumped into Analog Devices, Inc. (NASDAQ:ADI) headfirst. Balyasny Asset Management, managed by Dmitry Balyasny, established the largest position in Analog Devices, Inc. (NASDAQ:ADI). Balyasny Asset Management had $70.2 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital also initiated a $38.5 million position during the quarter. The following funds were also among the new ADI investors: John Hurley’s Cavalry Asset Management, Michel Massoud’s Melqart Asset Management, and Suraj Parkash Chopra’s Force Hill Capital Management.

Let’s now take a look at hedge fund activity in other stocks similar to Analog Devices, Inc. (NASDAQ:ADI). We will take a look at U.S. Bancorp (NYSE:USB), Gilead Sciences, Inc. (NASDAQ:GILD), PetroChina Company Limited (NYSE:PTR), Automatic Data Processing, Inc. (NASDAQ:ADP), Uber Technologies, Inc. (NYSE:UBER), Altria Group Inc (NYSE:MO), and Brookfield Asset Management Inc. (NYSE:BAM). This group of stocks’ market values resemble ADI’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 52.4 hedge funds with bullish positions and the average amount invested in these stocks was $3993 million. That figure was $5699 million in ADI’s case. Uber Technologies, Inc. (NYSE:UBER) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 7 bullish hedge fund positions. Analog Devices, Inc. (NASDAQ:ADI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADI is 64.6. 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 positive signal but 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately, ADI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ADI were disappointed as the stock returned -1.7% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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