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Is AOSL A Good Stock To Buy Now?

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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks aren't doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) changed recently.

Is AOSL a good stock to buy now? Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) was in 11 hedge funds' portfolios at the end of September. The all time high for this statistics is 15. AOSL investors should be aware of an increase in hedge fund interest of late. There were 10 hedge funds in our database with AOSL holdings at the end of June. Our calculations also showed that AOSL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Gavin Saitowitz of Prelude Capital
Gavin Saitowitz of Prelude Capital

Gavin Saitowitz of Prelude Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to view the new hedge fund action surrounding Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL).

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

At the end of September, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in AOSL a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Royce & Associates was the largest shareholder of Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), with a stake worth $18.2 million reported as of the end of September. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $10.4 million. D E Shaw, Arrowstreet Capital, and Millennium 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 Manatuck Hill Partners allocated the biggest weight to Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL), around 0.3% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.2 percent of its 13F equity portfolio to AOSL.

Now, specific money managers have jumped into Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL) headfirst. Manatuck Hill Partners, managed by Mark Broach, assembled the biggest position in Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL). Manatuck Hill Partners had $0.7 million invested in the company at the end of the quarter. John Overdeck and David Siegel's Two Sigma Advisors also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new AOSL position is Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).

Let's now take a look at hedge fund activity in other stocks similar to Alpha and Omega Semiconductor Ltd (NASDAQ:AOSL). These stocks are China Distance Education Hldgs Ltd (NYSE:DL), AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG), Genesco Inc. (NYSE:GCO), Craft Brew Alliance Inc (NASDAQ:BREW), Precision BioSciences, Inc. (NASDAQ:DTIL), Oportun Financial Corporation (NASDAQ:OPRT), and Artesian Resources Corporation (NASDAQ:ARTNA). This group of stocks' market values resemble AOSL's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position DL,3,6280,0 AMAG,11,139323,-3 GCO,13,21117,0 BREW,11,43900,-4 DTIL,14,13568,2 OPRT,5,2600,0 ARTNA,1,14960,0 Average,8.3,34535,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.3 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $38 million in AOSL's case. Precision BioSciences, Inc. (NASDAQ:DTIL) is the most popular stock in this table. On the other hand Artesian Resources Corporation (NASDAQ:ARTNA) is the least popular one with only 1 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. Our overall hedge fund sentiment score for AOSL is 66.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on AOSL as the stock returned 118.3% since the end of Q3 (through 12/8) 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.

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