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The Insider Monkey team has completed processing the quarterly 13F filings for the September quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Maxim Integrated Products Inc. (NASDAQ:MXIM).
Is MXIM a good stock to buy now? Hedge funds were taking an optimistic view. The number of long hedge fund positions went up by 19 recently. Maxim Integrated Products Inc. (NASDAQ:MXIM) was in 52 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 37. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MXIM isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 33 hedge funds in our database with MXIM holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 S&P 500 ETFs by more than 66 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Clint Carlson of Carlson Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's take a gander at the key hedge fund action regarding Maxim Integrated Products Inc. (NASDAQ:MXIM).
What have hedge funds been doing with Maxim Integrated Products Inc. (NASDAQ:MXIM)?
At the end of September, a total of 52 of the hedge funds tracked by Insider Monkey were long this stock, a change of 58% from one quarter earlier. On the other hand, there were a total of 32 hedge funds with a bullish position in MXIM a year ago. With hedge funds' capital changing hands, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
More specifically, Pentwater Capital Management was the largest shareholder of Maxim Integrated Products Inc. (NASDAQ:MXIM), with a stake worth $479.6 million reported as of the end of September. Trailing Pentwater Capital Management was Renaissance Technologies, which amassed a stake valued at $169.4 million. Magnetar Capital, D E Shaw, and Arrowstreet Capital 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 Havens Advisors allocated the biggest weight to Maxim Integrated Products Inc. (NASDAQ:MXIM), around 7.39% of its 13F portfolio. Pentwater Capital Management is also relatively very bullish on the stock, setting aside 6.22 percent of its 13F equity portfolio to MXIM.
As industrywide interest jumped, key hedge funds have been driving this bullishness. Pentwater Capital Management, managed by Matthew Halbower, established the most outsized position in Maxim Integrated Products Inc. (NASDAQ:MXIM). Pentwater Capital Management had $479.6 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser's Magnetar Capital also made a $160.9 million investment in the stock during the quarter. The following funds were also among the new MXIM investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Robert Emil Zoellner's Alpine Associates, and Clint Carlson's Carlson Capital.
Let's now take a look at hedge fund activity in other stocks similar to Maxim Integrated Products Inc. (NASDAQ:MXIM). These stocks are Akamai Technologies, Inc. (NASDAQ:AKAM), The Cooper Companies, Inc. (NYSE:COO), Vulcan Materials Company (NYSE:VMC), Palantir Technologies Inc. (NYSE:PLTR), Rollins, Inc. (NYSE:ROL), Discover Financial Services (NYSE:DFS), and Valero Energy Corporation (NYSE:VLO). All of these stocks' market caps are closest to MXIM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AKAM,40,441271,0 COO,30,1218371,-4 VMC,42,1331465,-9 PLTR,31,643387,31 ROL,29,673189,0 DFS,47,1120616,3 VLO,38,237285,-1 Average,36.7,809369,2.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.7 hedge funds with bullish positions and the average amount invested in these stocks was $809 million. That figure was $1964 million in MXIM's case. Discover Financial Services (NYSE:DFS) is the most popular stock in this table. On the other hand Rollins, Inc. (NYSE:ROL) is the least popular one with only 29 bullish hedge fund positions. Compared to these stocks Maxim Integrated Products Inc. (NASDAQ:MXIM) is more popular among hedge funds. Our overall hedge fund sentiment score for MXIM is 90. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 31.6% in 2020 through December 2nd but still managed to beat the market by 16 percentage points. Hedge funds were also right about betting on MXIM as the stock returned 24.6% since the end of September (through 12/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.