The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Cadence Design Systems Inc (NASDAQ:CDNS).
Is CDNS a good stock to buy now? Hedge funds were in a pessimistic mood. The number of bullish hedge fund bets were cut by 2 recently. Cadence Design Systems Inc (NASDAQ:CDNS) was in 37 hedge funds' portfolios at the end of September. The all time high for this statistic is 42. Our calculations also showed that CDNS 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). There were 39 hedge funds in our database with CDNS holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In today’s marketplace there are numerous gauges market participants use to appraise publicly traded companies. A duo of the most innovative gauges are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the best money managers can outperform their index-focused peers by a healthy amount (see the details here).
Noam Gottesman of GLG 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 new hedge fund action surrounding Cadence Design Systems Inc (NASDAQ:CDNS).
Do Hedge Funds Think CDNS Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2020. By comparison, 36 hedge funds held shares or bullish call options in CDNS 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.
According to Insider Monkey's hedge fund database, Alkeon Capital Management, managed by Panayotis Takis Sparaggis, holds the number one position in Cadence Design Systems Inc (NASDAQ:CDNS). Alkeon Capital Management has a $592.5 million position in the stock, comprising 1.1% of its 13F portfolio. On Alkeon Capital Management's heels is GLG Partners, managed by Noam Gottesman, which holds a $116.9 million position; 0.5% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions comprise Cliff Asness's AQR Capital Management, Ian Simm's Impax Asset Management and Brian Ashford-Russell and Tim Woolley's Polar Capital. In terms of the portfolio weights assigned to each position Lunia Capital allocated the biggest weight to Cadence Design Systems Inc (NASDAQ:CDNS), around 2.7% of its 13F portfolio. Alkeon Capital Management is also relatively very bullish on the stock, designating 1.1 percent of its 13F equity portfolio to CDNS.
Due to the fact that Cadence Design Systems Inc (NASDAQ:CDNS) has witnessed falling interest from the entirety of the hedge funds we track, it's safe to say that there is a sect of funds who were dropping their entire stakes heading into Q4. At the top of the heap, Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners said goodbye to the largest investment of all the hedgies tracked by Insider Monkey, comprising an estimated $13.6 million in stock. Charles Clough's fund, Clough Capital Partners, also cut its stock, about $6.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest fell by 2 funds heading into Q4.
Let's now take a look at hedge fund activity in other stocks similar to Cadence Design Systems Inc (NASDAQ:CDNS). We will take a look at Brown-Forman Corporation (NYSE:BF), PACCAR Inc (NASDAQ:PCAR), The Allstate Corporation (NYSE:ALL), T. Rowe Price Group, Inc. (NASDAQ:TROW), Trane Technologies plc (NYSE:TT), PPG Industries, Inc. (NYSE:PPG), and Best Buy Co., Inc. (NYSE:BBY). This group of stocks' market valuations are similar to CDNS's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BF,32,672078,4 PCAR,34,442104,4 ALL,38,1246660,-8 TROW,34,348235,0 TT,37,831744,-3 PPG,36,230601,0 BBY,40,1195041,7 Average,35.9,709495,0.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.9 hedge funds with bullish positions and the average amount invested in these stocks was $709 million. That figure was $1208 million in CDNS's case. Best Buy Co., Inc. (NYSE:BBY) is the most popular stock in this table. On the other hand Brown-Forman Corporation (NYSE:BF) is the least popular one with only 32 bullish hedge fund positions. Cadence Design Systems Inc (NASDAQ:CDNS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CDNS is 60.7. 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 33.3% in 2020 through December 18th and still beat the market by 16.4 percentage points. Hedge funds were also right about betting on CDNS as the stock returned 23.8% since the end of Q3 (through 12/18) 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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