The financial regulations require hedge funds and wealthy investors that exceeded the $100 million equity holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on September 30th. We at Insider Monkey have made an extensive database of nearly 750 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded Inphi Corporation (NYSE:IPHI) based on those filings.
Inphi Corporation (NYSE:IPHI) investors should be aware of an increase in enthusiasm from smart money of late. Our calculations also showed that IPHI isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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' 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_338857" align="aligncenter" width="500"] Charles Davidson of Wexford Capital[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's check out the fresh hedge fund action surrounding Inphi Corporation (NYSE:IPHI).
What have hedge funds been doing with Inphi Corporation (NYSE:IPHI)?
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in IPHI over the last 17 quarters. With hedge funds' capital changing hands, there exists an "upper tier" of key hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in Inphi Corporation (NYSE:IPHI), which was worth $68.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $47.2 million worth of shares. Two Sigma Advisors, D E Shaw, and Driehaus Capital 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 Cavalry Asset Management allocated the biggest weight to Inphi Corporation (NYSE:IPHI), around 5.27% of its portfolio. Boardman Bay Capital Management is also relatively very bullish on the stock, earmarking 1.54 percent of its 13F equity portfolio to IPHI.
As aggregate interest increased, some big names were leading the bulls' herd. Maverick Capital, managed by Lee Ainslie, initiated the biggest position in Inphi Corporation (NYSE:IPHI). Maverick Capital had $27.9 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also made a $20.8 million investment in the stock during the quarter. The other funds with brand new IPHI positions are Principal Global Investors's Columbus Circle Investors, Charles Davidson and Joseph Jacobs's Wexford Capital, and John Osterweis's Osterweis Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Inphi Corporation (NYSE:IPHI) but similarly valued. We will take a look at PotlatchDeltic Corporation (NASDAQ:PCH), Ryder System, Inc. (NYSE:R), Extended Stay America Inc (NASDAQ:STAY), and Chesapeake Energy Corporation (NYSE:CHK). This group of stocks' market caps resemble IPHI's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PCH,19,327723,7 R,21,356404,0 STAY,25,507430,-3 CHK,17,65596,-1 Average,20.5,314288,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $314 million. That figure was $388 million in IPHI's case. Extended Stay America Inc (NASDAQ:STAY) is the most popular stock in this table. On the other hand Chesapeake Energy Corporation (NYSE:CHK) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Inphi Corporation (NYSE:IPHI) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on IPHI as the stock returned 14.1% during the first two months of Q4 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.