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Hedge Fund Consensus Stocks vs. Lattice Semiconductor Corporation (LSCC) In 2019

Reymerlyn Martin

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained more than 57% each. Hedge funds' top 3 stock picks returned 45.7% last year and beat the S&P 500 ETFs by more than 14 percentage points. That's a big deal. This is why following the smart money sentiment is a useful tool at identifying the next stock to invest in.

Lattice Semiconductor Corporation (NASDAQ:LSCC) was in 24 hedge funds' portfolios at the end of September. LSCC has seen an increase in support from the world's most elite money managers in recent months. There were 20 hedge funds in our database with LSCC holdings at the end of the previous quarter. Our calculations also showed that LSCC 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).

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_736153" align="aligncenter" width="1613"] Didric Cederholm of Lion Point Capital[/caption]

Didric Cederholm Lion Point Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock 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. With all of this in mind we're going to take a gander at the fresh hedge fund action encompassing Lattice Semiconductor Corporation (NASDAQ:LSCC).

How have hedgies been trading Lattice Semiconductor Corporation (NASDAQ:LSCC)?

At Q3's end, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from one quarter earlier. On the other hand, there were a total of 18 hedge funds with a bullish position in LSCC a year ago. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

More specifically, Lion Point was the largest shareholder of Lattice Semiconductor Corporation (NASDAQ:LSCC), with a stake worth $68.2 million reported as of the end of September. Trailing Lion Point was Renaissance Technologies, which amassed a stake valued at $49.1 million. Two Sigma Advisors, KCL Capital, and Greenhouse Funds 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 Lion Point allocated the biggest weight to Lattice Semiconductor Corporation (NASDAQ:LSCC), around 7.6% of its 13F portfolio. Greenhouse Funds is also relatively very bullish on the stock, earmarking 3 percent of its 13F equity portfolio to LSCC.

As one would reasonably expect, specific money managers were breaking ground themselves. Maplelane Capital, managed by Leon Shaulov, assembled the most valuable position in Lattice Semiconductor Corporation (NASDAQ:LSCC). Maplelane Capital had $8.1 million invested in the company at the end of the quarter. Frank Slattery's Symmetry Peak Management also made a $3.5 million investment in the stock during the quarter. The following funds were also among the new LSCC investors: Larry Foley and Paul Farrell's Bronson Point Partners, Michael Gelband's ExodusPoint Capital, and Matthew Hulsizer's PEAK6 Capital Management.

Let's now review hedge fund activity in other stocks similar to Lattice Semiconductor Corporation (NASDAQ:LSCC). These stocks are Tilray, Inc. (NASDAQ:TLRY), Prospect Capital Corporation (NASDAQ:PSEC), Seritage Growth Properties (NYSE:SRG), and Belden Inc. (NYSE:BDC). All of these stocks' market caps resemble LSCC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TLRY,11,19410,0 PSEC,11,43044,0 SRG,13,432895,-2 BDC,13,77112,-2 Average,12,143115,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $233 million in LSCC's case. Seritage Growth Properties (NYSE:SRG) is the most popular stock in this table. On the other hand Tilray, Inc. (NASDAQ:TLRY) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Lattice Semiconductor Corporation (NASDAQ:LSCC) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on LSCC as the stock returned 176.6% in 2019 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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