U.S. Markets close in 51 mins

Hedge Funds Have Never Been More Bullish On Microchip Technology Incorporated (MCHP)

Reymerlyn Martin

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Microchip Technology Incorporated (NASDAQ:MCHP) in this article.

Microchip Technology Incorporated (NASDAQ:MCHP) has seen an increase in support from the world's most elite money managers of late. Our calculations also showed that MCHP isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

GOTHAM ASSET MANAGEMENT

We're going to review the new hedge fund action encompassing Microchip Technology Incorporated (NASDAQ:MCHP).

How are hedge funds trading Microchip Technology Incorporated (NASDAQ:MCHP)?

At Q1's end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards MCHP over the last 15 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

MCHP_jun2019

The largest stake in Microchip Technology Incorporated (NASDAQ:MCHP) was held by Platinum Asset Management, which reported holding $146.6 million worth of stock at the end of March. It was followed by Alkeon Capital Management with a $103.8 million position. Other investors bullish on the company included Partner Fund Management, Citadel Investment Group, and Point72 Asset Management.

As one would reasonably expect, specific money managers have jumped into Microchip Technology Incorporated (NASDAQ:MCHP) headfirst. Point72 Asset Management, managed by Steve Cohen, created the most outsized call position in Microchip Technology Incorporated (NASDAQ:MCHP). Point72 Asset Management had $33.2 million invested in the company at the end of the quarter. Joel Greenblatt's Gotham Asset Management also initiated a $21.9 million position during the quarter. The other funds with brand new MCHP positions are Bernard Selz's Selz Capital, Matthew Tewksbury's Stevens Capital Management, and Principal Global Investors's Columbus Circle Investors.

Let's now take a look at hedge fund activity in other stocks similar to Microchip Technology Incorporated (NASDAQ:MCHP). These stocks are Chipotle Mexican Grill, Inc. (NYSE:CMG), The Kroger Co. (NYSE:KR), KKR & Co Inc. (NYSE:KKR), and Discovery, Inc. (NASDAQ:DISCA). All of these stocks' market caps are closest to MCHP's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CMG,35,3506651,-3 KR,22,504839,-11 KKR,30,2526675,1 DISCA,26,373215,2 Average,28.25,1727845,-2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $1728 million. That figure was $585 million in MCHP's case. Chipotle Mexican Grill, Inc. (NYSE:CMG) is the most popular stock in this table. On the other hand The Kroger Co. (NYSE:KR) is the least popular one with only 22 bullish hedge fund positions. Microchip Technology Incorporated (NASDAQ:MCHP) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately MCHP wasn't nearly as popular as these 20 stocks and hedge funds that were betting on MCHP were disappointed as the stock returned -1.5% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

Related Content