Is CRUS Stock A Buy or Sell?
How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Cirrus Logic, Inc. (NASDAQ:CRUS).
Is CRUS stock a buy? Cirrus Logic, Inc. (NASDAQ:CRUS) has seen an increase in hedge fund sentiment recently. Cirrus Logic, Inc. (NASDAQ:CRUS) was in 28 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 33. Our calculations also showed that CRUS isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.
Alex Sacerdote of Whale Rock Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. Keeping this in mind we're going to view the latest hedge fund action regarding Cirrus Logic, Inc. (NASDAQ:CRUS).
Do Hedge Funds Think CRUS Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CRUS over the last 22 quarters. With hedgies' sentiment swirling, there exists an "upper tier" of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, Whale Rock Capital Management held the most valuable stake in Cirrus Logic, Inc. (NASDAQ:CRUS), which was worth $247.1 million at the end of the fourth quarter. On the second spot was Royce & Associates which amassed $66.4 million worth of shares. Woodline Partners, Point72 Asset Management, and AQR Capital Management 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 Force Hill Capital Management allocated the biggest weight to Cirrus Logic, Inc. (NASDAQ:CRUS), around 1.95% of its 13F portfolio. Whale Rock Capital Management is also relatively very bullish on the stock, designating 1.64 percent of its 13F equity portfolio to CRUS.
As aggregate interest increased, specific money managers were leading the bulls' herd. Force Hill Capital Management, managed by Suraj Parkash Chopra, created the biggest position in Cirrus Logic, Inc. (NASDAQ:CRUS). Force Hill Capital Management had $9.5 million invested in the company at the end of the quarter. Brandon Haley's Holocene Advisors also made a $1.4 million investment in the stock during the quarter. The other funds with brand new CRUS positions are Michael Gelband's ExodusPoint Capital, Mika Toikka's AlphaCrest Capital Management, and Greg Eisner's Engineers Gate Manager.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cirrus Logic, Inc. (NASDAQ:CRUS) but similarly valued. We will take a look at Bloom Energy Corporation (NYSE:BE), Qualys Inc (NASDAQ:QLYS), PennyMac Financial Services Inc (NYSE:PFSI), Rexnord Corp (NYSE:RXN), Emergent Biosolutions Inc (NYSE:EBS), Popular Inc (NASDAQ:BPOP), and Beam Therapeutics Inc. (NASDAQ:BEAM). This group of stocks' market values match CRUS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BE,19,169159,2 QLYS,22,252086,3 PFSI,29,536125,-2 RXN,20,347697,-4 EBS,19,116801,-3 BPOP,35,875865,5 BEAM,14,806038,7 Average,22.6,443396,1.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $443 million. That figure was $473 million in CRUS's case. Popular Inc (NASDAQ:BPOP) is the most popular stock in this table. On the other hand Beam Therapeutics Inc. (NASDAQ:BEAM) is the least popular one with only 14 bullish hedge fund positions. Cirrus Logic, Inc. (NASDAQ:CRUS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CRUS is 65.8. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately CRUS wasn't nearly as popular as these 30 stocks and hedge funds that were betting on CRUS were disappointed as the stock returned 2.9% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 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.
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