Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Cirrus Logic, Inc. (NASDAQ:CRUS) has seen a decrease in support from the world's most elite money managers recently. CRUS was in 17 hedge funds' portfolios at the end of the first quarter of 2019. There were 20 hedge funds in our database with CRUS holdings at the end of the previous quarter. Our calculations also showed that CRUS isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to take a peek at the new hedge fund action regarding Cirrus Logic, Inc. (NASDAQ:CRUS).
What have hedge funds been doing with Cirrus Logic, Inc. (NASDAQ:CRUS)?
At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards CRUS over the last 15 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, AQR Capital Management was the largest shareholder of Cirrus Logic, Inc. (NASDAQ:CRUS), with a stake worth $113.1 million reported as of the end of March. Trailing AQR Capital Management was Royce & Associates, which amassed a stake valued at $29.2 million. Arrowstreet Capital, GLG Partners, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.
Since Cirrus Logic, Inc. (NASDAQ:CRUS) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of hedge funds that slashed their entire stakes by the end of the third quarter. Intriguingly, Brett Hendrickson's Nokomis Capital dumped the largest stake of the "upper crust" of funds followed by Insider Monkey, worth close to $8.2 million in stock, and Dmitry Balyasny's Balyasny Asset Management was right behind this move, as the fund sold off about $1 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 3 funds by the end of the third quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cirrus Logic, Inc. (NASDAQ:CRUS) but similarly valued. These stocks are QTS Realty Trust Inc (NYSE:QTS), Advanced Disposal Services, Inc. (NYSE:ADSW), Seritage Growth Properties (NYSE:SRG), and Yamana Gold Inc. (NYSE:AUY). This group of stocks' market values resemble CRUS's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position QTS,22,371693,6 ADSW,12,123110,-3 SRG,17,451405,3 AUY,18,167074,-1 Average,17.25,278321,1.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $278 million. That figure was $227 million in CRUS's case. QTS Realty Trust Inc (NYSE:QTS) is the most popular stock in this table. On the other hand Advanced Disposal Services, Inc. (NYSE:ADSW) is the least popular one with only 12 bullish hedge fund positions. Cirrus Logic, Inc. (NASDAQ:CRUS) is not the least popular stock in this group but hedge fund interest is still below average. 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 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CRUS wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CRUS investors were disappointed as the stock returned -2% during the same time 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.