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Is Kulicke and Soffa Industries Inc. (KLIC) A Good Stock To Buy?

Nina Todic

We at Insider Monkey have gone over 738 13F filings that hedge funds and famous value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st. In this article we look at what those investors think of Kulicke and Soffa Industries Inc. (NASDAQ:KLIC).

Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) was in 17 hedge funds' portfolios at the end of the first quarter of 2019. KLIC shareholders have witnessed a decrease in activity from the world's largest hedge funds recently. There were 19 hedge funds in our database with KLIC positions at the end of the previous quarter. Our calculations also showed that klic isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Overdeck of Two Sigma

Let's analyze the new 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 second quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in KLIC over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with KLIC Positions

More specifically, Royce & Associates was the largest shareholder of Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), with a stake worth $85.4 million reported as of the end of March. Trailing Royce & Associates was Renaissance Technologies, which amassed a stake valued at $36 million. D E Shaw, Arrowstreet Capital, and Two Sigma Advisors were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) has witnessed declining sentiment from the aggregate hedge fund industry, logic holds that there exists a select few hedgies who were dropping their full holdings in the third quarter. It's worth mentioning that Paul Marshall and Ian Wace's Marshall Wace LLP dropped the biggest investment of the "upper crust" of funds followed by Insider Monkey, worth close to $4.6 million in stock. Hoon Kim's fund, Quantinno Capital, also dropped its stock, about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 2 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 Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) but similarly valued. These stocks are Bloom Energy Corporation (NYSE:BE), Hertz Global Holdings, Inc. (NYSE:HTZ), Endava plc (NYSE:DAVA), and Kinsale Capital Group, Inc. (NASDAQ:KNSL). This group of stocks' market caps are closest to KLIC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BE,9,15163,1 HTZ,26,944347,3 DAVA,6,16966,0 KNSL,9,18995,-3 Average,12.5,248868,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $249 million. That figure was $200 million in KLIC's case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand Endava plc (NYSE:DAVA) is the least popular one with only 6 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. This is a slightly positive signal but 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 KLIC wasn't nearly as popular as these 20 stocks and hedge funds that were betting on KLIC were disappointed as the stock returned -0.8% during the same 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.

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