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Hedge Funds Are Buying Monolithic Power Systems, Inc. (MPWR)

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After several tireless days we have finished crunching the numbers from nearly 900 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms' equity portfolios as of June 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Monolithic Power Systems, Inc. (NASDAQ:MPWR).

Monolithic Power Systems, Inc. (NASDAQ:MPWR) investors should pay attention to an increase in hedge fund interest in recent months. Monolithic Power Systems, Inc. (NASDAQ:MPWR) was in 34 hedge funds' portfolios at the end of June. The all time high for this statistic is 37. Our calculations also showed that MPWR isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Richard Driehaus of Driehaus Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. 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. 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 go over the recent hedge fund action regarding Monolithic Power Systems, Inc. (NASDAQ:MPWR).

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

At the end of the second quarter, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. By comparison, 36 hedge funds held shares or bullish call options in MPWR a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MPWR A Good Stock To Buy?
Is MPWR A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Impax Asset Management, managed by Ian Simm, holds the largest position in Monolithic Power Systems, Inc. (NASDAQ:MPWR). Impax Asset Management has a $193.7 million position in the stock, comprising 0.9% of its 13F portfolio. Coming in second is Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, which holds a $115.1 million position; the fund has 0.5% of its 13F portfolio invested in the stock. Remaining peers that are bullish consist of Ken Griffin's Citadel Investment Group, John Hurley's Cavalry Asset Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position Cavalry Asset Management allocated the biggest weight to Monolithic Power Systems, Inc. (NASDAQ:MPWR), around 6.13% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, designating 3.81 percent of its 13F equity portfolio to MPWR.

As industrywide interest jumped, key money managers have jumped into Monolithic Power Systems, Inc. (NASDAQ:MPWR) headfirst. Renaissance Technologies, created the most valuable position in Monolithic Power Systems, Inc. (NASDAQ:MPWR). Renaissance Technologies had $38.4 million invested in the company at the end of the quarter. Michael Rockefeller and KarláKroeker's Woodline Partners also initiated a $13.8 million position during the quarter. The following funds were also among the new MPWR investors: Javier Velazquez's Albar Capital, Paul Tudor Jones's Tudor Investment Corp, and Ray Dalio's Bridgewater Associates.

Let's check out hedge fund activity in other stocks similar to Monolithic Power Systems, Inc. (NASDAQ:MPWR). These stocks are Celanese Corporation (NYSE:CE), Diamondback Energy Inc (NASDAQ:FANG), United Airlines Holdings Inc (NYSE:UAL), Rollins, Inc. (NYSE:ROL), Zai Lab Limited (NASDAQ:ZLAB), Nuance Communications Inc. (NASDAQ:NUAN), and IDEX Corporation (NYSE:IEX). This group of stocks' market valuations are similar to MPWR's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CE,37,594932,1 FANG,38,443251,3 UAL,39,704030,1 ROL,30,610715,0 ZLAB,36,1029464,4 NUAN,72,5576065,15 IEX,22,945302,3 Average,39.1,1414823,3.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.1 hedge funds with bullish positions and the average amount invested in these stocks was $1415 million. That figure was $702 million in MPWR's case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand IDEX Corporation (NYSE:IEX) is the least popular one with only 22 bullish hedge fund positions. Monolithic Power Systems, Inc. (NASDAQ:MPWR) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MPWR is 46.6. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. A small number of hedge funds were also right about betting on MPWR as the stock returned 23.5% since the end of the second quarter (through 10/11) and outperformed the market by an even larger margin.

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