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 Ichor Holdings, Ltd. (NASDAQ:ICHR).
Ichor Holdings, Ltd. (NASDAQ:ICHR) has experienced a decrease in support from the world's most elite money managers of late. Our calculations also showed that ICHR isn't among the 30 most popular stocks among hedge funds (click for Q1 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 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.
[caption id="attachment_30621" align="aligncenter" width="392"] Cliff Asness of AQR Capital Management[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we're going to review the new hedge fund action surrounding Ichor Holdings, Ltd. (NASDAQ:ICHR).
How have hedgies been trading Ichor Holdings, Ltd. (NASDAQ:ICHR)?
At the end of the first quarter, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the fourth quarter of 2019. On the other hand, there were a total of 10 hedge funds with a bullish position in ICHR a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Richard Driehaus's Driehaus Capital has the largest position in Ichor Holdings, Ltd. (NASDAQ:ICHR), worth close to $8.5 million, corresponding to 0.3% of its total 13F portfolio. On Driehaus Capital's heels is Chuck Royce of Royce & Associates, with a $6.8 million position; 0.1% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism contain Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Cliff Asness's AQR Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Driehaus Capital allocated the biggest weight to Ichor Holdings, Ltd. (NASDAQ:ICHR), around 0.28% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.21 percent of its 13F equity portfolio to ICHR.
Judging by the fact that Ichor Holdings, Ltd. (NASDAQ:ICHR) has faced a decline in interest from hedge fund managers, logic holds that there was a specific group of money managers that elected to cut their full holdings heading into Q4. Interestingly, Steve Cohen's Point72 Asset Management dumped the largest stake of all the hedgies tracked by Insider Monkey, worth close to $17.1 million in stock, and Bruce Kovner's Caxton Associates LP was right behind this move, as the fund cut about $0.9 million worth. These transactions are important to note, as total hedge fund interest was cut by 1 funds heading into Q4.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Ichor Holdings, Ltd. (NASDAQ:ICHR) but similarly valued. These stocks are American Vanguard Corp. (NYSE:AVD), MYR Group Inc (NASDAQ:MYRG), Heska Corp (NASDAQ:HSKA), and Neoleukin Therapeutics, Inc. (NASDAQ:NLTX). All of these stocks' market caps are closest to ICHR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AVD,8,15829,2 MYRG,10,23804,-2 HSKA,15,50445,2 NLTX,20,197499,0 Average,13.25,71894,0.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $72 million. That figure was $33 million in ICHR's case. Neoleukin Therapeutics, Inc. (NASDAQ:NLTX) is the most popular stock in this table. On the other hand American Vanguard Corp. (NYSE:AVD) is the least popular one with only 8 bullish hedge fund positions. Ichor Holdings, Ltd. (NASDAQ:ICHR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th but still beat the market by 16.8 percentage points. Hedge funds were also right about betting on ICHR as the stock returned 35.4% in Q2 (through June 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.