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Lattice Semiconductor Corporation (LSCC): Hedge Funds In Wait-and-See Mode

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How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don't always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Lattice Semiconductor Corporation (NASDAQ:LSCC).

Hedge fund interest in Lattice Semiconductor Corporation (NASDAQ:LSCC) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that LSCC isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare LSCC to other stocks including LG Display Co Ltd. (NYSE:LPL), Churchill Downs Incorporated (NASDAQ:CHDN), and Rexford Industrial Realty Inc (NYSE:REXR) to get a better sense of its popularity.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Tim Woolley of Polar Capital

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. Keeping this in mind let's take a look at the latest hedge fund action regarding Lattice Semiconductor Corporation (NASDAQ:LSCC).

Do Hedge Funds Think LSCC Is A Good Stock To Buy Now?

At Q2's end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in LSCC a year ago. With the smart money's capital changing hands, there exists a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, Polar Capital held the most valuable stake in Lattice Semiconductor Corporation (NASDAQ:LSCC), which was worth $123.6 million at the end of the second quarter. On the second spot was Sylebra Capital Management which amassed $110.6 million worth of shares. Driehaus Capital, Citadel Investment Group, and Citadel Investment Group 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 Sylebra Capital Management allocated the biggest weight to Lattice Semiconductor Corporation (NASDAQ:LSCC), around 2.74% of its 13F portfolio. Polar Capital is also relatively very bullish on the stock, setting aside 0.54 percent of its 13F equity portfolio to LSCC.

Since Lattice Semiconductor Corporation (NASDAQ:LSCC) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain "tier" of funds that elected to cut their full holdings by the end of the second quarter. At the top of the heap, Michael Rockefeller and KarláKroeker's Woodline Partners sold off the largest stake of all the hedgies followed by Insider Monkey, worth an estimated $8.2 million in stock, and Josh Goldberg's G2 Investment Partners Management was right behind this move, as the fund sold off about $6.1 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's now review hedge fund activity in other stocks similar to Lattice Semiconductor Corporation (NASDAQ:LSCC). We will take a look at LG Display Co Ltd. (NYSE:LPL), Churchill Downs Incorporated (NASDAQ:CHDN), Rexford Industrial Realty Inc (NYSE:REXR), AutoNation, Inc. (NYSE:AN), Cameco Corporation (NYSE:CCJ), Acceleron Pharma Inc (NASDAQ:XLRN), and Zhihu Inc. (NYSE:ZH). This group of stocks' market caps are similar to LSCC's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LPL,7,27354,-2 CHDN,35,694267,16 REXR,21,128403,8 AN,24,610690,0 CCJ,25,587207,-5 XLRN,43,1579257,12 ZH,10,142882,-13 Average,23.6,538580,2.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.6 hedge funds with bullish positions and the average amount invested in these stocks was $539 million. That figure was $307 million in LSCC's case. Acceleron Pharma Inc (NASDAQ:XLRN) is the most popular stock in this table. On the other hand LG Display Co Ltd. (NYSE:LPL) is the least popular one with only 7 bullish hedge fund positions. Lattice Semiconductor Corporation (NASDAQ:LSCC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LSCC is 51.1. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on LSCC as the stock returned 22.1% since the end of Q2 (through 10/22) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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