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With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was Cirrus Logic, Inc. (NASDAQ:CRUS).
Cirrus Logic, Inc. (NASDAQ:CRUS) shareholders have witnessed a decrease in enthusiasm from smart money lately. Cirrus Logic, Inc. (NASDAQ:CRUS) was in 26 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 33. There were 28 hedge funds in our database with CRUS positions at the end of the fourth quarter. Our calculations also showed that CRUS isn't among the 30 most popular stocks among hedge funds (click for Q1 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 115 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.
Alex Litowitz of Magnetar Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. 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. Keeping this in mind we're going to analyze the new hedge fund action regarding Cirrus Logic, Inc. (NASDAQ:CRUS).
Do Hedge Funds Think CRUS Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CRUS over the last 23 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Cirrus Logic, Inc. (NASDAQ:CRUS), which was worth $67.7 million at the end of the fourth quarter. On the second spot was Millennium Management which amassed $60 million worth of shares. AQR Capital Management, Woodline Partners, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Force Hill Capital Management allocated the biggest weight to Cirrus Logic, Inc. (NASDAQ:CRUS), around 2.52% of its 13F portfolio. Algert Global is also relatively very bullish on the stock, setting aside 1.06 percent of its 13F equity portfolio to CRUS.
Due to the fact that Cirrus Logic, Inc. (NASDAQ:CRUS) has experienced falling interest from the aggregate hedge fund industry, we can see that there lies a certain "tier" of funds that slashed their positions entirely heading into Q2. Intriguingly, Alex Sacerdote's Whale Rock Capital Management dumped the biggest position of the "upper crust" of funds monitored by Insider Monkey, valued at close to $247.1 million in stock. Steve Cohen's fund, Point72 Asset Management, also said goodbye to its stock, about $28.5 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 2 funds heading into Q2.
Let's now take a look at hedge fund activity in other stocks similar to Cirrus Logic, Inc. (NASDAQ:CRUS). We will take a look at Power Integrations Inc (NASDAQ:POWI), Signify Health, Inc. (NYSE:SGFY), STAAR Surgical Company (NASDAQ:STAA), Lazard Ltd (NYSE:LAZ), Rackspace Technology, Inc. (NASDAQ:RXT), Spirit Realty Capital Inc (NYSE:SRC), and American Eagle Outfitters Inc. (NYSE:AEO). This group of stocks' market caps match CRUS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position POWI,18,136336,1 SGFY,28,189217,28 STAA,16,1291146,-1 LAZ,19,770857,-1 RXT,11,125806,-3 SRC,18,166994,1 AEO,43,948063,4 Average,21.9,518346,4.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $518 million. That figure was $286 million in CRUS's case. American Eagle Outfitters Inc. (NYSE:AEO) is the most popular stock in this table. On the other hand Rackspace Technology, Inc. (NASDAQ:RXT) is the least popular one with only 11 bullish hedge fund positions. Cirrus Logic, Inc. (NASDAQ:CRUS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CRUS is 50.1. 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 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 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately CRUS wasn't nearly as popular as these 5 stocks and hedge funds that were betting on CRUS were disappointed as the stock returned 1.2% since the end of March (through 7/9) 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 many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.