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Hedge Funds Have Never Been This Bullish On Cognex Corporation (CGNX)

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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 Cognex Corporation (NASDAQ:CGNX) changed recently.

Cognex Corporation (NASDAQ:CGNX) has seen an increase in activity from the world's largest hedge funds of late. Cognex Corporation (NASDAQ:CGNX) was in 34 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CGNX isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Today there are a lot of tools market participants can use to analyze stocks. A duo of the less known tools are hedge fund and insider trading sentiment. We have shown that, historically, those who follow the best picks of the elite investment managers can outperform the market by a solid margin (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Andrew Sandler of Sandler Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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 analyze the latest hedge fund action regarding Cognex Corporation (NASDAQ:CGNX).

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

At Q1's end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the fourth quarter of 2020. On the other hand, there were a total of 16 hedge funds with a bullish position in CGNX a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CGNX A Good Stock To Buy?
Is CGNX A Good Stock To Buy?

The largest stake in Cognex Corporation (NASDAQ:CGNX) was held by Fundsmith LLP, which reported holding $133.7 million worth of stock at the end of December. It was followed by Royce & Associates with a $57.5 million position. Other investors bullish on the company included Select Equity Group, AQR Capital Management, and Polar Capital. In terms of the portfolio weights assigned to each position Montanaro Asset Management allocated the biggest weight to Cognex Corporation (NASDAQ:CGNX), around 5.05% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, setting aside 1.5 percent of its 13F equity portfolio to CGNX.

As one would reasonably expect, some big names have been driving this bullishness. Select Equity Group, managed by Robert Joseph Caruso, created the most valuable position in Cognex Corporation (NASDAQ:CGNX). Select Equity Group had $54.4 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $9 million position during the quarter. The other funds with brand new CGNX positions are Andrew Sandler's Sandler Capital Management, Suraj Parkash Chopra's Force Hill Capital Management, and Richard SchimeláandáLawrence Sapanski's Cinctive Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cognex Corporation (NASDAQ:CGNX) but similarly valued. We will take a look at Lumen Technologies, Inc. (NYSE:LUMN), News Corp (NASDAQ:NWS), News Corp (NASDAQ:NWSA), Charles River Laboratories International Inc. (NYSE:CRL), Wynn Resorts, Limited (NASDAQ:WYNN), ABIOMED, Inc. (NASDAQ:ABMD), and PerkinElmer, Inc. (NYSE:PKI). All of these stocks' market caps resemble CGNX's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LUMN,32,1004948,3 NWS,21,168400,10 NWSA,35,1235000,3 CRL,42,1118745,-1 WYNN,49,1074268,-3 ABMD,26,1003000,3 PKI,33,1748962,2 Average,34,1050475,2.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 34 hedge funds with bullish positions and the average amount invested in these stocks was $1050 million. That figure was $499 million in CGNX's case. Wynn Resorts, Limited (NASDAQ:WYNN) is the most popular stock in this table. On the other hand News Corp (NASDAQ:NWS) is the least popular one with only 21 bullish hedge fund positions. Cognex Corporation (NASDAQ:CGNX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CGNX is 61.2. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately CGNX wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CGNX investors were disappointed as the stock returned -0.7% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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