Was The Smart Money Right About Piling Into Microchip Technology Incorporated (MCHP)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Microchip Technology Incorporated (NASDAQ:MCHP) based on that data.

Microchip Technology Incorporated (NASDAQ:MCHP) shareholders have witnessed an increase in hedge fund interest recently. Microchip Technology Incorporated (NASDAQ:MCHP) was in 50 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 46. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 42 hedge funds in our database with MCHP positions at the end of the first quarter. Our calculations also showed that MCHP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Kerr Neilson of Platinum Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, billionaire John Paulson is loading up on the miners, so we are checking out stock pitches like this mining stock. 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. 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. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding Microchip Technology Incorporated (NASDAQ:MCHP).

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

Heading into the third quarter of 2021, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MCHP over the last 24 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Among these funds, Platinum Asset Management held the most valuable stake in Microchip Technology Incorporated (NASDAQ:MCHP), which was worth $279.5 million at the end of the second quarter. On the second spot was Millennium Management which amassed $175.1 million worth of shares. Point State Capital, Point72 Asset Management, and Generation Investment Management 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 Breakline Capital allocated the biggest weight to Microchip Technology Incorporated (NASDAQ:MCHP), around 8% of its 13F portfolio. Platinum Asset Management is also relatively very bullish on the stock, dishing out 6.47 percent of its 13F equity portfolio to MCHP.

Now, key money managers have been driving this bullishness. Bridgewater Associates, managed by Ray Dalio, assembled the most outsized position in Microchip Technology Incorporated (NASDAQ:MCHP). Bridgewater Associates had $11.3 million invested in the company at the end of the quarter. Jinghua Yan’s TwinBeech Capital also made a $8.8 million investment in the stock during the quarter. The other funds with brand new MCHP positions are Tor Minesuk’s Mondrian Capital, Jeremy Hosking’s Hosking Partners, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Microchip Technology Incorporated (NASDAQ:MCHP) but similarly valued. These stocks are Amphenol Corporation (NYSE:APH), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Baxter International Inc. (NYSE:BAX), Prudential Financial Inc (NYSE:PRU), Las Vegas Sands Corp. (NYSE:LVS), PPG Industries, Inc. (NYSE:PPG), and Cintas Corporation (NASDAQ:CTAS). This group of stocks’ market caps are closest to MCHP’s market cap.

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As you can see these stocks had an average of 39.6 hedge funds with bullish positions and the average amount invested in these stocks was $2462 million. That figure was $1121 million in MCHP’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Cintas Corporation (NASDAQ:CTAS) is the least popular one with only 21 bullish hedge fund positions. Microchip Technology Incorporated (NASDAQ:MCHP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MCHP is 70.2. 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 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on MCHP as the stock returned 14.9% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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