At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards ASE Technology Holding Co., Ltd. (NYSE:ASX).
Is ASX a good stock to buy now? ASE Technology Holding Co., Ltd. (NYSE:ASX) shares haven't seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 11 hedge funds' portfolios at the end of the third quarter of 2020. Our calculations also showed that ASX 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as RenaissanceRe Holdings Ltd. (NYSE:RNR), Paylocity Holding Corp (NASDAQ:PCTY), and Concho Resources Inc. (NYSE:CXO) to gather more data points.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Donald Sussman of Paloma Partners
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. Now we're going to analyze the fresh hedge fund action encompassing ASE Technology Holding Co., Ltd. (NYSE:ASX).
Do Hedge Funds Think ASX Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, 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. The graph below displays the number of hedge funds with bullish position in ASX over the last 21 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in ASE Technology Holding Co., Ltd. (NYSE:ASX) was held by Fisher Asset Management, which reported holding $109.9 million worth of stock at the end of September. It was followed by LMR Partners with a $12.8 million position. Other investors bullish on the company included Renaissance Technologies, Arrowstreet Capital, and Millennium Management. In terms of the portfolio weights assigned to each position LMR Partners allocated the biggest weight to ASE Technology Holding Co., Ltd. (NYSE:ASX), around 0.26% of its 13F portfolio. Schonfeld Strategic Advisors is also relatively very bullish on the stock, dishing out 0.12 percent of its 13F equity portfolio to ASX.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Marshall Wace LLP. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because only one of the 800+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Paloma Partners).
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as ASE Technology Holding Co., Ltd. (NYSE:ASX) but similarly valued. We will take a look at RenaissanceRe Holdings Ltd. (NYSE:RNR), Paylocity Holding Corp (NASDAQ:PCTY), Concho Resources Inc. (NYSE:CXO), Guidewire Software Inc (NYSE:GWRE), GCI Liberty, Inc. (NASDAQ:GLIBA), Camden Property Trust (NYSE:CPT), and Centrais Elétricas Brasileiras S.A. - Eletrobrás (NYSE:EBR). This group of stocks' market valuations are closest to ASX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RNR,37,806129,-4 PCTY,27,505551,3 CXO,47,731966,3 GWRE,34,1087613,5 GLIBA,48,2311934,-5 CPT,25,327898,-1 EBR,4,1572,-4 Average,31.7,824666,-0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.7 hedge funds with bullish positions and the average amount invested in these stocks was $825 million. That figure was $132 million in ASX's case. GCI Liberty, Inc. (NASDAQ:GLIBA) is the most popular stock in this table. On the other hand Centrais Elétricas Brasileiras S.A. - Eletrobrás (NYSE:EBR) is the least popular one with only 4 bullish hedge fund positions. ASE Technology Holding Co., Ltd. (NYSE:ASX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ASX is 35. 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. A small number of hedge funds were also right about betting on ASX as the stock returned 38.7% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.