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Is Keysight Technologies (KEYS) A Smart Long-Term Buy?

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·3 min read
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  • KEYS
  • ^GSPC

Wedgewood Partners, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly portfolio net return of +2.75% was recorded by the fund for the third quarter of 2021, outperforming the S&P 500 Index that delivered a +0.58% return for the same period, and the +1.16% gain of the Russell 1000 Growth Index. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Wedgewood Partners, in its Q3 2021 investor letter, mentioned Keysight Technologies, Inc. (NYSE: KEYS) and discussed its stance on the firm. Keysight Technologies, Inc. is a Santa Rosa, California-based electronics company with a $31 billion market capitalization. KEYS delivered a 27.72% return since the beginning of the year, while its 12-month returns are up by 60.81%. The stock closed at $168.71 per share on October 15, 2021.

Here is what Wedgewood Partners has to say about Keysight Technologies, Inc. in its Q3 2021 investor letter:

"Keysight’s revenue and earnings growth surged as a combination of easy comparisons and pent-up demand converged with excellent execution in the face of widespread competitive supply chain disruptions. Keysight primarily serves research and development labs across most industries, providing hardware and, increasingly, software content that enables bleeding-edge product testing. Many of the technologies that Keysight helps enable will not come to market for several years, so Keysight must develop many of its own custom parts, especially microprocessors. The Company's captive fabrication plant has helped it avoid many of the shortfalls seen at companies that rely on more off-the-shelf silicon. As customer R&D budgets move inexorably higher, we expect the Company to grow its share of wallet and drive attractive growth for the next several years."


Based on our calculations, Keysight Technologies, Inc. (NYSE: KEYS) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. KEYS was in 32 hedge fund portfolios at the end of the second quarter of 2021. Keysight Technologies, Inc. (NYSE: KEYS) delivered an 8.84% return in the past 3 months.

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’ 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 115 percentage points since March 2017 (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.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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.

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