Hedge funds don’t get the respect they used to get. Nowadays investors prefer passive funds over actively managed funds. One thing they don’t realize is that 100% of the passive funds didn’t see the coronavirus recession coming, but a lot of hedge funds did. Even we published an article near the end of February and predicted a US recession. Think about all the losses you could have avoided if you sold your shares in February and bought them back at the end of March. In this article we are going to analyze the smart money sentiment towards Photronics, Inc. (NASDAQ:PLAB).
Is Photronics, Inc. (NASDAQ:PLAB) ready to rally soon? Hedge funds are buying. The number of long hedge fund bets went up by 3 lately. Our calculations also showed that PLAB isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most traders, hedge funds are viewed as unimportant, old investment tools of yesteryear. While there are greater than 8000 funds in operation at present, Our researchers hone in on the masters of this group, around 850 funds. These money managers shepherd most of the hedge fund industry’s total capital, and by keeping an eye on their best investments, Insider Monkey has spotted a few investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Joel Greenblatt of Gotham Asset Management
We leave no stone unturned when looking for the next great investment idea. For example, this investor can predict short term winners following earnings announcements with high accuracy, so we check out his stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to take a look at the fresh hedge fund action regarding Photronics, Inc. (NASDAQ:PLAB).
What does smart money think about Photronics, Inc. (NASDAQ:PLAB)?
At the end of the fourth quarter, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in PLAB over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Renaissance Technologies was the largest shareholder of Photronics, Inc. (NASDAQ:PLAB), with a stake worth $32.3 million reported as of the end of September. Trailing Renaissance Technologies was Royce & Associates, which amassed a stake valued at $15.9 million. Marshall Wace LLP, AQR Capital Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Photronics, Inc. (NASDAQ:PLAB), around 2.52% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, setting aside 0.54 percent of its 13F equity portfolio to PLAB.
As industrywide interest jumped, specific money managers were leading the bulls’ herd. Citadel Investment Group, managed by Ken Griffin, created the most valuable position in Photronics, Inc. (NASDAQ:PLAB). Citadel Investment Group had $1.5 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also made a $0.4 million investment in the stock during the quarter. The following funds were also among the new PLAB investors: Guy Shahar’s DSAM Partners, Frank Slattery’s Symmetry Peak Management, and Joel Greenblatt’s Gotham Asset Management.
Let’s check out hedge fund activity in other stocks similar to Photronics, Inc. (NASDAQ:PLAB). We will take a look at The Greenbrier Companies Inc (NYSE:GBX), ARMOUR Residential REIT, Inc. (NYSE:ARR), Oasis Petroleum Inc. (NASDAQ:OAS), and NextGen Healthcare, Inc. (NASDAQ:NXGN). This group of stocks’ market caps resemble PLAB’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GBX | 12 | 24436 | 2 |
| ARR | 11 | 34003 | -3 |
| OAS | 17 | 97611 | 2 |
| NXGN | 16 | 25475 | 3 |
| Average | 14 | 45381 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $114 million in PLAB’s case. Oasis Petroleum Inc. (NASDAQ:OAS) is the most popular stock in this table. On the other hand ARMOUR Residential REIT, Inc. (NYSE:ARR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Photronics, Inc. (NASDAQ:PLAB) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 1.0% in 2020 through May 1st and still beat the market by 12.9 percentage points. Unfortunately PLAB wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on PLAB were disappointed as the stock returned -28% during the four months of 2020 (through May 1st) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
