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Is Alpha and Omega Semiconductor Ltd (AOSL) A Good Stock To Buy?

Abigail Fisher

The 700+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the first quarter, which unveil their equity positions as of March 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL).

Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) shares haven't seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds' portfolios at the end of March. At the end of this article we will also compare AOSL to other stocks including Digital Turbine Inc (NASDAQ:APPS), American Superconductor Corporation (NASDAQ:AMSC), and Solar Senior Capital Ltd (NASDAQ:SUNS) to get a better sense of its popularity.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Chuck Royce

We're going to take a glance at the new hedge fund action surrounding Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL).

What does smart money think about Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL)?

Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 10 hedge funds with a bullish position in AOSL a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

AOSL_june2019

According to Insider Monkey's hedge fund database, Chuck Royce's Royce & Associates has the most valuable position in Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), worth close to $18.6 million, comprising 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Jim Simons of Renaissance Technologies, with a $11.9 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish consist of D. E. Shaw's D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Israel Englander's Millennium Management.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) but similarly valued. We will take a look at Digital Turbine Inc (NASDAQ:APPS), American Superconductor Corporation (NASDAQ:AMSC), Solar Senior Capital Ltd (NASDAQ:SUNS), and Protective Insurance Corporation (NASDAQ:PTVCB). This group of stocks' market valuations match AOSL's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APPS,15,17435,5 AMSC,16,46521,9 SUNS,2,851,1 PTVCB,7,27866,1 Average,10,23168,4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $23 million. That figure was $43 million in AOSL's case. American Superconductor Corporation (NASDAQ:AMSC) is the most popular stock in this table. On the other hand Solar Senior Capital Ltd (NASDAQ:SUNS) is the least popular one with only 2 bullish hedge fund positions. Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately AOSL wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AOSL were disappointed as the stock returned -23.3% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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