Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Cadence Design Systems Inc (NASDAQ:CDNS) in this article.
Cadence Design Systems Inc (NASDAQ:CDNS) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 33 hedge funds’ portfolios at the end of September. Our calculations also showed that CDNS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). At the end of this article we will also compare CDNS to other stocks including Roku, Inc. (NASDAQ:ROKU), Schlumberger Limited. (NYSE:SLB), and Lucid Group Inc. (NASDAQ:LCID) to get a better sense of its popularity.
Noam Gottesman of GLG Partners
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 let’s check out the new hedge fund action surrounding Cadence Design Systems Inc (NASDAQ:CDNS).
Do Hedge Funds Think CDNS Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CDNS over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Alkeon Capital Management held the most valuable stake in Cadence Design Systems Inc (NASDAQ:CDNS), which was worth $792.9 million at the end of the third quarter. On the second spot was Impax Asset Management which amassed $312.5 million worth of shares. GLG Partners, Arrowstreet Capital, and Citadel Investment Group 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 York Capital Management allocated the biggest weight to Cadence Design Systems Inc (NASDAQ:CDNS), around 2.28% of its 13F portfolio. Alkeon Capital Management is also relatively very bullish on the stock, designating 1.34 percent of its 13F equity portfolio to CDNS.
Because Cadence Design Systems Inc (NASDAQ:CDNS) has faced bearish sentiment from hedge fund managers, we can see that there lies a certain “tier” of fund managers who were dropping their entire stakes by the end of the third quarter. At the top of the heap, Ray Dalio’s Bridgewater Associates dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at close to $13.2 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund said goodbye to about $12.9 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cadence Design Systems Inc (NASDAQ:CDNS) but similarly valued. We will take a look at Roku, Inc. (NASDAQ:ROKU), Schlumberger Limited. (NYSE:SLB), Lucid Group Inc. (NASDAQ:LCID), Trane Technologies plc (NYSE:TT), Digital Realty Trust, Inc. (NYSE:DLR), Walgreens Boots Alliance Inc (NASDAQ:WBA), and Pioneer Natural Resources Company (NYSE:PXD). This group of stocks’ market values match CDNS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROKU | 57 | 2828579 | -4 |
| SLB | 39 | 1062933 | -2 |
| LCID | 18 | 432623 | 18 |
| TT | 39 | 1147583 | 2 |
| DLR | 28 | 253530 | -2 |
| WBA | 37 | 850173 | -4 |
| PXD | 48 | 958649 | 3 |
| Average | 38 | 1076296 | 1.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 38 hedge funds with bullish positions and the average amount invested in these stocks was $1076 million. That figure was $1923 million in CDNS’s case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand Lucid Group Inc. (NASDAQ:LCID) is the least popular one with only 18 bullish hedge fund positions. Cadence Design Systems Inc (NASDAQ:CDNS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CDNS is 47.8. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. A small number of hedge funds were also right about betting on CDNS as the stock returned 17.2% since the end of the third quarter (through 11/30) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
