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Should I Buy Xilinx, Inc. (XLNX)?

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·5 min read
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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Xilinx, Inc. (NASDAQ:XLNX).

Is Xilinx, Inc. (NASDAQ:XLNX) an attractive stock to buy now? Prominent investors were in an optimistic mood. The number of long hedge fund bets went up by 3 recently. Xilinx, Inc. (NASDAQ:XLNX) was in 62 hedge funds' portfolios at the end of September. The all time high for this statistic is 66. Our calculations also showed that XLNX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 59 hedge funds in our database with XLNX holdings at the end of June.

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 view the latest hedge fund action regarding Xilinx, Inc. (NASDAQ:XLNX).

Josh Friedman Canyon Capital
Josh Friedman Canyon Capital

Joshua Friedman of Canyon Capital Advisors

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

At the end of the third quarter, a total of 62 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. By comparison, 46 hedge funds held shares or bullish call options in XLNX a year ago. With hedgies' sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

More specifically, D E Shaw was the largest shareholder of Xilinx, Inc. (NASDAQ:XLNX), with a stake worth $632.4 million reported as of the end of September. Trailing D E Shaw was Pentwater Capital Management, which amassed a stake valued at $435.6 million. Matrix Capital Management, Canyon Capital Advisors, and Segantii Capital 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 Sand Grove Capital Partners allocated the biggest weight to Xilinx, Inc. (NASDAQ:XLNX), around 15.89% of its 13F portfolio. Hunting Hill Global Capital is also relatively very bullish on the stock, earmarking 13.57 percent of its 13F equity portfolio to XLNX.

Consequently, some big names have been driving this bullishness. Taconic Capital, managed by Frank Brosens, initiated the most valuable call position in Xilinx, Inc. (NASDAQ:XLNX). Taconic Capital had $42.7 million invested in the company at the end of the quarter. Simon Sadler's Segantii Capital also initiated a $15.1 million position during the quarter. The following funds were also among the new XLNX investors: Larry Chen and Terry Zhang's Tairen Capital, Matthew Halbower's Pentwater Capital Management, and Michael Rockefeller and KarláKroeker's Woodline Partners.

Let's now take a look at hedge fund activity in other stocks similar to Xilinx, Inc. (NASDAQ:XLNX). These stocks are Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), Banco Bradesco SA (NYSE:BBD), Nutrien Ltd. (NYSE:NTR), Hilton Worldwide Holdings Inc (NYSE:HLT), Discover Financial Services (NYSE:DFS), Okta, Inc. (NASDAQ:OKTA), and Zscaler, Inc. (NASDAQ:ZS). All of these stocks' market caps resemble XLNX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ERIC,21,227446,2 BBD,13,228299,-5 NTR,30,853049,2 HLT,44,5364120,-1 DFS,37,516149,0 OKTA,62,2262165,5 ZS,38,1624343,0 Average,35,1582224,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35 hedge funds with bullish positions and the average amount invested in these stocks was $1582 million. That figure was $4541 million in XLNX's case. Okta, Inc. (NASDAQ:OKTA) is the most popular stock in this table. On the other hand Banco Bradesco SA (NYSE:BBD) is the least popular one with only 13 bullish hedge fund positions. Xilinx, Inc. (NASDAQ:XLNX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for XLNX is 86.2. 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. Hedge funds were also right about betting on XLNX as the stock returned 51.6% since the end of Q3 (through 11/30) 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.