Hedge funds run by legendary names like George Soros and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant outperformance. That's why we pay special attention to hedge fund activity in these stocks.
Is Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) the right investment to pursue these days? Hedge funds are in a bearish mood. The number of bullish hedge fund positions went down by 3 recently. Our calculations also showed that KLIC isn't among the 30 most popular stocks among hedge funds. KLIC was in 19 hedge funds' portfolios at the end of December. There were 22 hedge funds in our database with KLIC holdings at the end of the previous quarter.
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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 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.
Let's take a glance at the recent hedge fund action surrounding Kulicke and Soffa Industries Inc. (NASDAQ:KLIC).
What have hedge funds been doing with Kulicke and Soffa Industries Inc. (NASDAQ:KLIC)?
Heading into the first quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. By comparison, 21 hedge funds held shares or bullish call options in KLIC a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
The largest stake in Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) was held by Royce & Associates, which reported holding $83.2 million worth of stock at the end of December. It was followed by Valueworks LLC with a $45.6 million position. Other investors bullish on the company included Renaissance Technologies, D E Shaw, and Two Sigma Advisors.
Because Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of funds that slashed their entire stakes heading into Q3. It's worth mentioning that Alex Sacerdote's Whale Rock Capital Management cut the biggest position of the "upper crust" of funds watched by Insider Monkey, worth an estimated $12.7 million in stock. Lee Ainslie's fund, Maverick Capital, also sold off its stock, about $7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 3 funds heading into Q3.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) but similarly valued. These stocks are Shutterfly, Inc. (NASDAQ:SFLY), Universal Corp (NYSE:UVV), Orchard Therapeutics plc (NASDAQ:ORTX), and Walker & Dunlop Inc. (NYSE:WD). All of these stocks' market caps are similar to KLIC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SFLY,22,367739,-1 UVV,15,104264,-1 ORTX,12,272739,12 WD,11,54026,-7 Average,15,199692,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $200 million. That figure was $244 million in KLIC's case. Shutterfly, Inc. (NASDAQ:SFLY) is the most popular stock in this table. On the other hand Walker & Dunlop Inc. (NYSE:WD) is the least popular one with only 11 bullish hedge fund positions. Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) is not the most popular stock in this group but hedge fund interest is still above average. 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. Hedge funds were also right about betting on KLIC, though not to the same extent, as the stock returned 17.8% and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.