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Is Cognex Corporation (CGNX) A Good Stock To Buy ?

Reymerlyn Martin

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended March 31, so let’s proceed with the discussion of the hedge fund sentiment on Cognex Corporation (NASDAQ:CGNX).

Hedge fund interest in Cognex Corporation (NASDAQ:CGNX) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare CGNX to other stocks including Snap-on Incorporated (NYSE:SNA), Albemarle Corporation (NYSE:ALB), and Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) to get a better sense of its popularity.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Let's go over the key hedge fund action surrounding Cognex Corporation (NASDAQ:CGNX).

What have hedge funds been doing with Cognex Corporation (NASDAQ:CGNX)?

At the end of the first quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in CGNX over the last 15 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

CGNX_jun2019

According to Insider Monkey's hedge fund database, Joho Capital, managed by Robert Karr, holds the biggest position in Cognex Corporation (NASDAQ:CGNX). Joho Capital has a $97.2 million position in the stock, comprising 16.4% of its 13F portfolio. The second most bullish fund manager is Royce & Associates, led by Chuck Royce, holding a $57.3 million position; 0.5% of its 13F portfolio is allocated to the stock. Other hedge funds and institutional investors that are bullish contain Brian Ashford-Russell and Tim Woolley's Polar Capital, Cliff Asness's AQR Capital Management and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital.

Because Cognex Corporation (NASDAQ:CGNX) has faced a decline in interest from the smart money, it's safe to say that there exists a select few funds that slashed their full holdings last quarter. Intriguingly, Andreas Halvorsen's Viking Global cut the biggest investment of all the hedgies watched by Insider Monkey, worth about $34.2 million in stock. Peter Muller's fund, PDT Partners, also dumped its stock, about $14.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cognex Corporation (NASDAQ:CGNX) but similarly valued. We will take a look at Snap-on Incorporated (NYSE:SNA), Albemarle Corporation (NYSE:ALB), Grupo Aval Acciones y Valores S.A. (NYSE:AVAL), and Bausch Health Companies  Inc. (NYSE:BHC). This group of stocks' market values resemble CGNX's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNA,25,498590,0 ALB,25,186420,-3 AVAL,8,15040,-1 BHC,31,1801427,-1 Average,22.25,625369,-1.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.25 hedge funds with bullish positions and the average amount invested in these stocks was $625 million. That figure was $231 million in CGNX's case. Bausch Health Companies Inc. (NYSE:BHC) is the most popular stock in this table. On the other hand Grupo Aval Acciones y Valores S.A. (NYSE:AVAL) is the least popular one with only 8 bullish hedge fund positions. Cognex Corporation (NASDAQ:CGNX) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CGNX wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CGNX investors were disappointed as the stock returned -9.9% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

Disclosure: None. This article was originally published at Insider Monkey.

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