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Hedge Funds Aren’t Crazy About Lattice Semiconductor Corporation (LSCC) Anymore

Debasis Saha

In this article you are going to find out whether hedge funds think Lattice Semiconductor Corporation (NASDAQ:LSCC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Lattice Semiconductor Corporation (NASDAQ:LSCC) investors should pay attention to a decrease in support from the world's most elite money managers of late. LSCC was in 26 hedge funds' portfolios at the end of March. There were 32 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 Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_735675" align="aligncenter" width="400"] Didric Cederholm of Lion Point Capital[/caption]

Didric Cederholm Lion Point Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now we're going to take a look at the key hedge fund action encompassing Lattice Semiconductor Corporation (NASDAQ:LSCC).

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

Heading into the second quarter of 2020, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -19% from one quarter earlier. By comparison, 25 hedge funds held shares or bullish call options in LSCC a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

Is LSCC A Good Stock To Buy?

The largest stake in Lattice Semiconductor Corporation (NASDAQ:LSCC) was held by Southport Management, which reported holding $356.4 million worth of stock at the end of September. It was followed by Polar Capital with a $55.7 million position. Other investors bullish on the company included Lion Point, Columbus Circle Investors, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Bronson Point Partners allocated the biggest weight to Lattice Semiconductor Corporation (NASDAQ:LSCC), around 9.95% of its 13F portfolio. Lion Point is also relatively very bullish on the stock, setting aside 9.09 percent of its 13F equity portfolio to LSCC.

Due to the fact that Lattice Semiconductor Corporation (NASDAQ:LSCC) has witnessed bearish sentiment from hedge fund managers, it's easy to see that there lies a certain "tier" of fund managers who sold off their full holdings last quarter. It's worth mentioning that  Renaissance Technologies cut the biggest position of the "upper crust" of funds followed by Insider Monkey, valued at close to $33.4 million in stock, and Leon Shaulov's Maplelane Capital was right behind this move, as the fund said goodbye to about $27.8 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 6 funds last quarter.

Let's check out hedge fund activity in other stocks similar to Lattice Semiconductor Corporation (NASDAQ:LSCC). These stocks are Assured Guaranty Ltd. (NYSE:AGO), W.R. Grace & Co. (NYSE:GRA), Amicus Therapeutics, Inc. (NASDAQ:FOLD), and Envista Holdings Corporation (NYSE:NVST). This group of stocks' market caps match LSCC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AGO,28,299640,-5 GRA,35,866211,-11 FOLD,28,842269,-7 NVST,22,273772,-20 Average,28.25,570473,-10.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $570 million. That figure was $531 million in LSCC's case. W.R. Grace & Co. (NYSE:GRA) is the most popular stock in this table. On the other hand Envista Holdings Corporation (NYSE:NVST) is the least popular one with only 22 bullish hedge fund positions. Lattice Semiconductor Corporation (NASDAQ:LSCC) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on LSCC as the stock returned 39.6% during the second quarter and outperformed the market by an even larger margin.

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

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