U.S. Markets open in 7 hrs 44 mins

How Did Cypress Semiconductor Corporation (CY) Compare Against Hedge Fund Darlings in 2019?

Debasis Saha

It is already common knowledge that individual investors do not usually have the necessary resources and abilities to properly research an investment opportunity. As a result, most investors pick their illusory “winners” by making a superficial analysis and research that leads to poor performance on aggregate. Since stock returns aren't usually symmetrically distributed and index returns are more affected by a few outlier stocks (i.e. the FAANG stocks dominating and driving S&P 500 Index's returns in recent years), more than 50% of the constituents of the Standard and Poor’s 500 Index underperform the benchmark. Hence, if you randomly pick a stock, there is more than 50% chance that you'd fail to beat the market. At the same time, the 20 most favored S&P 500 stocks by the hedge funds monitored by Insider Monkey generated an outperformance of more than 10 percentage points so far in 2019. Of course, hedge funds do make wrong bets on some occasions and these get disproportionately publicized on financial media, but piggybacking their moves can beat the broader market on average. That's why we are going to go over recent hedge fund activity in Cypress Semiconductor Corporation (NASDAQ:CY).

Cypress Semiconductor Corporation (NASDAQ:CY) investors should pay attention to a decrease in support from the world's most elite money managers of late. CY was in 34 hedge funds' portfolios at the end of September. There were 36 hedge funds in our database with CY holdings at the end of the previous quarter. Our calculations also showed that CY isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

In the financial world there are a lot of formulas market participants can use to appraise publicly traded companies. A pair of the most innovative formulas are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outpace their index-focused peers by a superb amount (see the details here).

[caption id="attachment_746825" align="alignnone" width="1613"] Matthew Halbower of Pentwater Capital[/caption]

Matthew Halbower Pentwater Capital

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to take a gander at the recent hedge fund action regarding Cypress Semiconductor Corporation (NASDAQ:CY).

How are hedge funds trading Cypress Semiconductor Corporation (NASDAQ:CY)?

At the end of the third quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CY over the last 17 quarters. With hedgies' capital changing hands, there exists a few notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

Is CY A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Matthew Halbower's Pentwater Capital Management has the most valuable position in Cypress Semiconductor Corporation (NASDAQ:CY), worth close to $224.5 million, accounting for 3.5% of its total 13F portfolio. On Pentwater Capital Management's heels is Carl Tiedemann and Michael Tiedemann of TIG Advisors, with a $182 million position; the fund has 8.4% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish include Alec Litowitz and Ross Laser's Magnetar Capital, Clint Carlson's Carlson Capital and Robert Emil Zoellner's Alpine Associates. In terms of the portfolio weights assigned to each position TIG Advisors allocated the biggest weight to Cypress Semiconductor Corporation (NASDAQ:CY), around 8.36% of its 13F portfolio. Melqart Asset Management is also relatively very bullish on the stock, setting aside 8.1 percent of its 13F equity portfolio to CY.

Since Cypress Semiconductor Corporation (NASDAQ:CY) has witnessed a decline in interest from hedge fund managers, we can see that there is a sect of hedge funds that slashed their full holdings last quarter. It's worth mentioning that Nick Niell's Arrowgrass Capital Partners sold off the biggest investment of the 750 funds tracked by Insider Monkey, valued at an estimated $40.1 million in stock. George Soros's fund, Soros Fund Management, also said goodbye to its stock, about $36.1 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 2 funds last quarter.

Let's also examine hedge fund activity in other stocks similar to Cypress Semiconductor Corporation (NASDAQ:CY). We will take a look at Juniper Networks, Inc. (NYSE:JNPR), RenaissanceRe Holdings Ltd. (NYSE:RNR), Spirit AeroSystems Holdings, Inc. (NYSE:SPR), and F5 Networks, Inc. (NASDAQ:FFIV). This group of stocks' market values match CY's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position JNPR,30,637184,2 RNR,17,657683,-3 SPR,36,2062498,5 FFIV,22,1179111,-1 Average,26.25,1134119,0.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $1134 million. That figure was $1457 million in CY's case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand RenaissanceRe Holdings Ltd. (NYSE:RNR) is the least popular one with only 17 bullish hedge fund positions. Cypress Semiconductor Corporation (NASDAQ:CY) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on CY as the stock returned 87.4% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

Related Content