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How Did Hedge Funds’ Cognex Corporation (CGNX) Bets Fare?

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The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 867 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of September 30th, when the S&P 500 Index was trading around the 4300 level. Since then investors decided to bet on the economic recovery and a stock market rebound even though we experienced a temporary correction in January. In this article you are going to find out whether hedge funds thought Cognex Corporation (NASDAQ:CGNX) was a good investment heading into the fourth quarter and how the stock traded in comparison to the top hedge fund picks.

Cognex Corporation (NASDAQ:CGNX) investors should pay attention to a decrease in enthusiasm from smart money lately. Cognex Corporation (NASDAQ:CGNX) was in 34 hedge funds' portfolios at the end of September. The all time high for this statistic is 35. There were 35 hedge funds in our database with CGNX positions at the end of the second quarter. Our calculations also showed that CGNX isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Chuck Royce
Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Now we're going to take a glance at the fresh hedge fund action surrounding Cognex Corporation (NASDAQ:CGNX).

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

At Q3's end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the second quarter of 2021. By comparison, 28 hedge funds held shares or bullish call options in CGNX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CGNX A Good Stock To Buy?
Is CGNX A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Fundsmith LLP, managed by Terry Smith, holds the most valuable position in Cognex Corporation (NASDAQ:CGNX). Fundsmith LLP has a $130.4 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Chuck Royce of Royce & Associates, with a $51.9 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions contain D. E. Shaw's D E Shaw, Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Cliff Asness's AQR Capital Management. In terms of the portfolio weights assigned to each position Montanaro Asset Management allocated the biggest weight to Cognex Corporation (NASDAQ:CGNX), around 3.59% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, dishing out 0.43 percent of its 13F equity portfolio to CGNX.

Due to the fact that Cognex Corporation (NASDAQ:CGNX) has experienced a decline in interest from the smart money, logic holds that there exists a select few hedgies that elected to cut their positions entirely last quarter. Interestingly, Andrew Sandler's Sandler Capital Management dropped the biggest position of the 750 funds monitored by Insider Monkey, valued at about $18.8 million in stock, and Robert Joseph Caruso's Select Equity Group was right behind this move, as the fund dumped about $11.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Cognex Corporation (NASDAQ:CGNX) but similarly valued. These stocks are BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), PTC Inc (NASDAQ:PTC), Cardinal Health, Inc. (NYSE:CAH), Clarivate Plc (NYSE:CLVT), Alliant Energy Corporation (NYSE:LNT), Zendesk Inc (NYSE:ZEN), and News Corp (NASDAQ:NWSA). This group of stocks' market valuations match CGNX's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BMRN,44,1441300,0 PTC,37,1819643,6 CAH,36,664971,-4 CLVT,32,4723546,-9 LNT,17,76693,1 ZEN,53,1557704,1 NWSA,34,737689,-3 Average,36.1,1574507,-1.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.1 hedge funds with bullish positions and the average amount invested in these stocks was $1575 million. That figure was $428 million in CGNX's case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Alliant Energy Corporation (NYSE:LNT) is the least popular one with only 17 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. Our overall hedge fund sentiment score for CGNX is 56.8. 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 negative signal and 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 29.6% in 2021 and surpassed the market again by 3.6 percentage points. Unfortunately, CGNX wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CGNX investors were disappointed as the stock returned -17.1% since the end of September (through 1/31) 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 all of these stocks already outperformed the market since 2019.

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