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We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) and determine whether hedge funds skillfully traded this stock.
MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) investors should pay attention to an increase in support from the world's most elite money managers of late. MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) was in 23 hedge funds' portfolios at the end of June. The all time high for this statistics is 18. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 16 hedge funds in our database with MTSI holdings at the end of March. Our calculations also showed that MTSI isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
To the average investor there are a multitude of formulas market participants use to grade stocks. Two of the best formulas are hedge fund and insider trading indicators. We have shown that, historically, those who follow the best picks of the top fund managers can outclass their index-focused peers by a significant amount (see the details here).
Richard Driehaus of Driehaus Capital
At Insider Monkey we scour multiple sources to uncover 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 and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind let's check out the latest hedge fund action encompassing MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI).
How have hedgies been trading MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI)?
At Q2's end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 44% from the first quarter of 2020. By comparison, 17 hedge funds held shares or bullish call options in MTSI a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) was held by Yiheng Capital, which reported holding $112.8 million worth of stock at the end of September. It was followed by D E Shaw with a $85.4 million position. Other investors bullish on the company included PEAK6 Capital Management, Royce & Associates, and Columbus Circle Investors. In terms of the portfolio weights assigned to each position Yiheng Capital allocated the biggest weight to MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), around 5.62% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, designating 0.84 percent of its 13F equity portfolio to MTSI.
As aggregate interest increased, key money managers have been driving this bullishness. Columbus Circle Investors, managed by Principal Global Investors, established the most valuable position in MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI). Columbus Circle Investors had $12.2 million invested in the company at the end of the quarter. Renaissance Technologies also made a $8.3 million investment in the stock during the quarter. The other funds with brand new MTSI positions are Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors, Richard Driehaus's Driehaus Capital, and Paul Tudor Jones's Tudor Investment Corp.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) but similarly valued. We will take a look at Colliers International Group Inc (NASDAQ:CIGI), Tootsie Roll Industries, Inc. (NYSE:TR), Opko Health Inc. (NASDAQ:OPK), Telephone & Data Systems, Inc. (NYSE:TDS), Sterling Bancorp (NYSE:STL), Old National Bancorp (NASDAQ:ONB), and TC Pipelines, LP (NYSE:TCP). This group of stocks' market caps resemble MTSI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CIGI,11,527308,1 TR,19,81934,5 OPK,16,51806,3 TDS,21,175372,0 STL,27,179819,2 ONB,17,25811,2 TCP,2,2582,0 Average,16.1,149233,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.1 hedge funds with bullish positions and the average amount invested in these stocks was $149 million. That figure was $290 million in MTSI's case. Sterling Bancorp (NYSE:STL) is the most popular stock in this table. On the other hand TC Pipelines, LP (NYSE:TCP) is the least popular one with only 2 bullish hedge fund positions. MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MTSI is 82. 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 positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately MTSI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on MTSI were disappointed as the stock returned -1% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.