What Hedge Funds Think of Semtech Corporation (SMTC)?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we will analyze Semtech Corporation (NASDAQ:SMTC) from the perspective of those successful funds.

Semtech Corporation (NASDAQ:SMTC) has experienced an increase in support from the world’s most successful money managers of late. More specifically, during the third quarter, the number of funds tracked by Insider Monkey bullish on Semtech went up to 17 from 13. At the end of this article we will also compare SMTC to other stocks including Astoria Financial Corp (NYSE:AF), AZZ Incorporated (NYSE:AZZ), and International Speedway Corporation (NASDAQ:ISCA) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Keeping this in mind, let’s take a peek at the fresh action surrounding Semtech Corporation (NASDAQ:SMTC).

What have hedge funds been doing with Semtech Corporation (NASDAQ:SMTC)?

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in Semtech, up by 31% from the end of June. By comparison, 12 hedge funds held shares or bullish call options in SMTC heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Griffin’s Citadel Investment Group has the number one position in Semtech Corporation (NASDAQ:SMTC), worth close to $25.2 million, corresponding to less than 0.1%% of its total 13F portfolio. The second largest stake is held by Israel Englander’s Millennium Management, which disclosed a $18.2 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that hold long positions comprise Jim Simons’ Renaissance Technologies, D. E. Shaw’s D E Shaw, and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As industrywide interest jumped, some big names have jumped into Semtech Corporation (NASDAQ:SMTC) headfirst. Highbridge Capital Management, led by Glenn Russell Dubin, initiated the biggest position in Semtech Corporation (NASDAQ:SMTC). Highbridge Capital Management had $2.1 million invested in the company at the end of the quarter. James Dondero’s Highland Capital Management also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new SMTC investors: Mike Vranos’ Ellington, Philip Hempleman’s Ardsley Partners, and Neil Chriss’ Hutchin Hill Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Semtech Corporation (NASDAQ:SMTC) but similarly valued. These stocks are Astoria Financial Corp (NYSE:AF), AZZ Incorporated (NYSE:AZZ), International Speedway Corporation (NASDAQ:ISCA), and Precision Drilling Corp (USA) (NYSE:PDS). All of these stocks’ market caps are similar to SMTC’s market cap.

As you can see these stocks had an average of 11 funds with bullish positions and the average amount invested in these stocks was $86 million. That figure was $83 million in SMTC’s case. International Speedway Corporation (NASDAQ:ISCA) is the most popular stock in this table. On the other hand Precision Drilling Corp (USA) (NYSE:PDS) is the least popular one with only seven bullish hedge fund positions. Semtech Corporation (NASDAQ:SMTC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard International Speedway Corporation (NASDAQ:ISCA) might be a better candidate to consider taking a long position in.