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Is Cree, Inc. (CREE) A Good Stock To Buy?

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The Insider Monkey team has completed processing the quarterly 13F filings for the March 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 Cree, Inc. (NASDAQ:CREE).

Is CREE a good stock to buy? Prominent investors were reducing their bets on the stock. The number of bullish hedge fund bets shrunk by 3 recently. Cree, Inc. (NASDAQ:CREE) was in 30 hedge funds' portfolios at the end of March. The all time high for this statistic is 33. Our calculations also showed that CREE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 33 hedge funds in our database with CREE holdings at the end of December.

To the average investor there are plenty of signals market participants have at their disposal to analyze publicly traded companies. A couple of the most underrated signals are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the top hedge fund managers can beat the broader indices by a solid amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Alex Sacerdote of Whale Rock Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Now we're going to take a look at the fresh hedge fund action surrounding Cree, Inc. (NASDAQ:CREE).

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

Heading into the second quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in CREE a year ago. With hedge funds' sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is CREE A Good Stock To Buy?
Is CREE A Good Stock To Buy?

Among these funds, Whale Rock Capital Management held the most valuable stake in Cree, Inc. (NASDAQ:CREE), which was worth $249.5 million at the end of the fourth quarter. On the second spot was Iridian Asset Management which amassed $120.3 million worth of shares. D E Shaw, Citadel Investment Group, and Citadel Investment Group 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 Panview Capital allocated the biggest weight to Cree, Inc. (NASDAQ:CREE), around 12.35% of its 13F portfolio. One01 Capital is also relatively very bullish on the stock, designating 2.79 percent of its 13F equity portfolio to CREE.

Because Cree, Inc. (NASDAQ:CREE) has experienced bearish sentiment from hedge fund managers, we can see that there lies a certain "tier" of hedge funds that decided to sell off their entire stakes last quarter. At the top of the heap, Philippe Laffont's Coatue Management cut the largest investment of the 750 funds monitored by Insider Monkey, comprising an estimated $204.3 million in stock. Glen Kacher's fund, Light Street Capital, also dumped its stock, about $84.2 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds last quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Cree, Inc. (NASDAQ:CREE) but similarly valued. We will take a look at The Mosaic Company (NYSE:MOS), Bill.com Holdings, Inc. (NYSE:BILL), Lincoln National Corporation (NYSE:LNC), RPM International Inc. (NYSE:RPM), Banco de Chile (NYSE:BCH), Sibanye Stillwater Limited (NYSE:SBSW), and Host Hotels and Resorts Inc (NYSE:HST). This group of stocks' market caps are closest to CREE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MOS,38,944874,-1 BILL,51,2411036,-1 LNC,36,715298,0 RPM,20,79868,-5 BCH,5,53333,2 SBSW,16,272595,-1 HST,25,240687,3 Average,27.3,673956,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.3 hedge funds with bullish positions and the average amount invested in these stocks was $674 million. That figure was $605 million in CREE's case. Bill.com Holdings, Inc. (NYSE:BILL) is the most popular stock in this table. On the other hand Banco de Chile (NYSE:BCH) is the least popular one with only 5 bullish hedge fund positions. Cree, Inc. (NASDAQ:CREE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CREE is 56.4. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 22.8% in 2021 through July 2nd and beat the market again by 6 percentage points. Unfortunately CREE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CREE were disappointed as the stock returned -11.3% since the end of March (through 7/2) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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