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Hedge Fund Consensus Stocks vs. NXP Semiconductors NV (NXPI) In 2019

Abigail Fisher

Last year's fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.1% in 2019 (through December 23) and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards NXP Semiconductors NV (NASDAQ:NXPI) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.

Is NXP Semiconductors NV (NASDAQ:NXPI) the right investment to pursue these days? The best stock pickers are getting less bullish. The number of bullish hedge fund positions fell by 1 lately. Our calculations also showed that NXPI 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). NXPI was in 59 hedge funds' portfolios at the end of September. There were 60 hedge funds in our database with NXPI positions at the end of the previous quarter.

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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman of GLG Partners[/caption]

Noam Gottesman GLG Partners

We leave no stone unturned when looking for the next great investment idea. For example 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. 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 is still extremely cheap despite already gaining 20 percent. Now we're going to view the fresh hedge fund action regarding NXP Semiconductors NV (NASDAQ:NXPI).

How have hedgies been trading NXP Semiconductors NV (NASDAQ:NXPI)?

Heading into the fourth quarter of 2019, a total of 59 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -2% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards NXPI over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Soroban Capital Partners held the most valuable stake in NXP Semiconductors NV (NASDAQ:NXPI), which was worth $551.6 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $259.3 million worth of shares. Point72 Asset Management, D E Shaw, and GLG Partners 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 Totem Point Management allocated the biggest weight to NXP Semiconductors NV (NASDAQ:NXPI), around 17.87% of its 13F portfolio. Melqart Asset Management is also relatively very bullish on the stock, dishing out 10.41 percent of its 13F equity portfolio to NXPI.

Due to the fact that NXP Semiconductors NV (NASDAQ:NXPI) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there was a specific group of money managers that slashed their entire stakes last quarter. At the top of the heap, Sculptor Capital sold off the largest stake of the 750 funds watched by Insider Monkey, worth about $168.7 million in call options. Brandon Haley's fund, Holocene Advisors, also cut its call options, about $93.5 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds last quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as NXP Semiconductors NV (NASDAQ:NXPI) but similarly valued. These stocks are Atlassian Corporation Plc (NASDAQ:TEAM), AvalonBay Communities Inc (NYSE:AVB), WEC Energy Group, Inc. (NYSE:WEC), and LyondellBasell Industries NV (NYSE:LYB). This group of stocks' market values are closest to NXPI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TEAM,46,2413494,10 AVB,19,537344,-2 WEC,19,383786,6 LYB,31,502464,-14 Average,28.75,959272,0 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $959 million. That figure was $3381 million in NXPI's case. Atlassian Corporation Plc (NASDAQ:TEAM) is the most popular stock in this table. On the other hand AvalonBay Communities Inc (NYSE:AVB) is the least popular one with only 19 bullish hedge fund positions. Compared to these stocks NXP Semiconductors NV (NASDAQ:NXPI) is more popular among hedge funds. 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 NXPI as the stock returned 76.8% so far in 2019 (through 12/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations. 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.

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