"Value has performed relatively poorly since the 2017 shift, but we believe challenges to the S&P 500’s dominance are mounting and resulting active opportunities away from the index are growing. At some point, this fault line will break, likely on the back of rising rates, and all investors will be reminded that the best time to diversify away from the winners is when it is most painful. The bargain of capturing long-term value may be short-term pain, but enough is eventually enough and it comes time to harvest the benefits.," said Clearbridge Investments in its market commentary. We aren't sure whether long-term interest rates will top 5% and value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That's why we believe it would be worthwhile to take a look at the hedge fund sentiment on Himax Technologies, Inc. (NASDAQ:HIMX) in order to identify whether reputable and successful top money managers continue to believe in its potential.
Is Himax Technologies, Inc. (NASDAQ:HIMX) a buy, sell, or hold? Investors who are in the know are in a bearish mood. The number of bullish hedge fund positions went down by 1 in recent months. Our calculations also showed that himx isn't among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to review the fresh hedge fund action surrounding Himax Technologies, Inc. (NASDAQ:HIMX).
What does the smart money think about Himax Technologies, Inc. (NASDAQ:HIMX)?
Heading into the first quarter of 2019, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in HIMX over the last 14 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Yiheng Capital was the largest shareholder of Himax Technologies, Inc. (NASDAQ:HIMX), with a stake worth $11.7 million reported as of the end of December. Trailing Yiheng Capital was Luminus Management, which amassed a stake valued at $7.7 million. Dalton Investments, OZ Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Judging by the fact that Himax Technologies, Inc. (NASDAQ:HIMX) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of funds who sold off their full holdings in the third quarter. At the top of the heap, David Halpert's Prince Street Capital Management sold off the biggest investment of all the hedgies tracked by Insider Monkey, worth an estimated $7.2 million in stock, and Warren Lammert's Granite Point Capital was right behind this move, as the fund cut about $1.9 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 1 funds in the third quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Himax Technologies, Inc. (NASDAQ:HIMX) but similarly valued. These stocks are NextDecade Corporation (NASDAQ:NEXT), Argan, Inc. (NYSE:AGX), Peoples Bancorp Inc. (NASDAQ:PEBO), and Sonic Automotive Inc (NYSE:SAH). This group of stocks' market caps are similar to HIMX's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NEXT,8,452258,2 AGX,13,85300,-4 PEBO,8,26504,-2 SAH,10,10221,1 Average,9.75,143571,-0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $144 million. That figure was $28 million in HIMX's case. Argan, Inc. (NYSE:AGX) is the most popular stock in this table. On the other hand NextDecade Corporation (NASDAQ:NEXT) is the least popular one with only 8 bullish hedge fund positions. Himax Technologies, Inc. (NASDAQ:HIMX) 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 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately HIMX wasn't nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); HIMX investors were disappointed as the stock returned -4.4% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.