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Hedge Funds Are Buying MaxLinear, Inc. (MXL)

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Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren't timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards MaxLinear, Inc. (NYSE:MXL) changed recently.

MaxLinear, Inc. (NYSE:MXL) shareholders have witnessed an increase in enthusiasm from smart money lately. MaxLinear, Inc. (NYSE:MXL) was in 19 hedge funds' portfolios at the end of March. The all time high for this statistic is 29. Our calculations also showed that MXL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to take a look at the fresh hedge fund action surrounding MaxLinear, Inc. (NYSE:MXL).

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

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 46% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in MXL a year ago. With hedgies' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is MXL A Good Stock To Buy?
Is MXL A Good Stock To Buy?

The largest stake in MaxLinear, Inc. (NYSE:MXL) was held by G2 Investment Partners Management, which reported holding $13.5 million worth of stock at the end of December. It was followed by Two Sigma Advisors with a $13 million position. Other investors bullish on the company included Brant Point Investment Management, D E Shaw, and Millennium Management. In terms of the portfolio weights assigned to each position G2 Investment Partners Management allocated the biggest weight to MaxLinear, Inc. (NYSE:MXL), around 2.15% of its 13F portfolio. Brant Point Investment Management is also relatively very bullish on the stock, earmarking 1.47 percent of its 13F equity portfolio to MXL.

As aggregate interest increased, some big names were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in MaxLinear, Inc. (NYSE:MXL). Arrowstreet Capital had $4.6 million invested in the company at the end of the quarter. Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors also initiated a $1.7 million position during the quarter. The other funds with brand new MXL positions are Michael Gelband's ExodusPoint Capital, Noam Gottesman's GLG Partners, and Donald Sussman's Paloma Partners.

Let's go over hedge fund activity in other stocks similar to MaxLinear, Inc. (NYSE:MXL). These stocks are Livent Corporation (NYSE:LTHM), Big Lots, Inc. (NYSE:BIG), Global Blood Therapeutics Inc (NASDAQ:GBT), Ligand Pharmaceuticals Inc. (NASDAQ:LGND), Murphy Oil Corporation (NYSE:MUR), First Merchants Corporation (NASDAQ:FRME), and The St. Joe Company (NYSE:JOE). This group of stocks' market caps resemble MXL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LTHM,22,193265,2 BIG,20,229903,1 GBT,19,594683,-7 LGND,13,61979,-6 MUR,20,139295,2 FRME,11,135533,2 JOE,17,1178397,5 Average,17.4,361865,-0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.4 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $85 million in MXL's case. Livent Corporation (NYSE:LTHM) is the most popular stock in this table. On the other hand First Merchants Corporation (NASDAQ:FRME) is the least popular one with only 11 bullish hedge fund positions. MaxLinear, Inc. (NYSE:MXL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MXL is 66. 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. 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 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Hedge funds were also right about betting on MXL, though not to the same extent, as the stock returned 16.9% since Q1 (through July 16th) and outperformed the market as well.

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