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Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 900 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Coherent, Inc. (NASDAQ:COHR), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is Coherent, Inc. (NASDAQ:COHR) an exceptional stock to buy now? Hedge funds were taking an optimistic view. The number of bullish hedge fund positions rose by 19 lately. Coherent, Inc. (NASDAQ:COHR) was in 41 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic was 35. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that COHR isn't among the 30 most popular stocks among hedge funds (click for Q1 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' 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 115 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Matthew Halbower of Pentwater Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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. Keeping this in mind let's check out the new hedge fund action surrounding Coherent, Inc. (NASDAQ:COHR).
Do Hedge Funds Think COHR Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 41 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 86% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards COHR over the last 23 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Pentwater Capital Management, managed by Matthew Halbower, holds the number one position in Coherent, Inc. (NASDAQ:COHR). Pentwater Capital Management has a $303.5 million position in the stock, comprising 2.9% of its 13F portfolio. The second most bullish fund manager is Magnetar Capital, led by Alec Litowitz and Ross Laser, holding a $203.4 million position; 2% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions comprise Robert Emil Zoellner's Alpine Associates, Dmitry Balyasny's Balyasny Asset Management and Simon Davies's Sand Grove Capital Partners. In terms of the portfolio weights assigned to each position Sand Grove Capital Partners allocated the biggest weight to Coherent, Inc. (NASDAQ:COHR), around 8.73% of its 13F portfolio. Havens Advisors is also relatively very bullish on the stock, designating 7.83 percent of its 13F equity portfolio to COHR.
With a general bullishness amongst the heavyweights, key money managers were leading the bulls' herd. Pentwater Capital Management, managed by Matthew Halbower, created the most valuable position in Coherent, Inc. (NASDAQ:COHR). Pentwater Capital Management had $303.5 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser's Magnetar Capital also made a $203.4 million investment in the stock during the quarter. The other funds with brand new COHR positions are Robert Emil Zoellner's Alpine Associates, Dmitry Balyasny's Balyasny Asset Management, and Simon Davies's Sand Grove Capital Partners.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Coherent, Inc. (NASDAQ:COHR) but similarly valued. We will take a look at Stericycle Inc (NASDAQ:SRCL), The Timken Company (NYSE:TKR), nCino, Inc. (NASDAQ:NCNO), BJ's Wholesale Club Holdings, Inc. (NYSE:BJ), Globus Medical Inc (NYSE:GMED), Harley-Davidson, Inc. (NYSE:HOG), and Emcor Group Inc (NYSE:EME). All of these stocks' market caps resemble COHR's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SRCL,24,648956,-1 TKR,23,225807,-11 NCNO,21,342756,-7 BJ,14,135957,-11 GMED,28,193769,-6 HOG,28,822936,-7 EME,20,166658,-5 Average,22.6,362406,-6.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.6 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $1454 million in COHR's case. Globus Medical Inc (NYSE:GMED) is the most popular stock in this table. On the other hand BJ's Wholesale Club Holdings, Inc. (NYSE:BJ) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Coherent, Inc. (NASDAQ:COHR) is more popular among hedge funds. Our overall hedge fund sentiment score for COHR is 90. 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 17.4% in 2021 through June 18th and still beat the market by 6.1 percentage points. Unfortunately COHR wasn't nearly as popular as these 5 stocks and hedge funds that were betting on COHR were disappointed as the stock returned 3.7% since the end of the first quarter (through 6/18) 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 since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.