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In this article we are going to use hedge fund sentiment as a tool and determine whether MaxLinear, Inc. (NYSE:MXL) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds' picks don't beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is MXL a good stock to buy now? Money managers were getting more bullish. The number of long hedge fund bets improved by 3 lately. MaxLinear, Inc. (NYSE:MXL) was in 18 hedge funds' portfolios at the end of September. The all time high for this statistic is 29. Our calculations also showed that MXL 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 15 hedge funds in our database with MXL holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
David Siegel of Two Sigma Advisors
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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 we're going to review the fresh hedge fund action encompassing MaxLinear, Inc. (NYSE:MXL).
Do Hedge Funds Think MXL Is A Good Stock To Buy Now?
At third quarter's end, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MXL over the last 21 quarters. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
Among these funds, D E Shaw held the most valuable stake in MaxLinear, Inc. (NYSE:MXL), which was worth $17.7 million at the end of the third quarter. On the second spot was KCL Capital which amassed $11 million worth of shares. Polar Capital, Two Sigma Advisors, and Cinctive Capital Management 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 Boardman Bay Capital Management allocated the biggest weight to MaxLinear, Inc. (NYSE:MXL), around 3.46% of its 13F portfolio. KCL Capital is also relatively very bullish on the stock, setting aside 1.05 percent of its 13F equity portfolio to MXL.
As one would reasonably expect, key money managers were breaking ground themselves. KCL Capital, managed by Kevin Cottrell and Chris LaSusa, created the most outsized position in MaxLinear, Inc. (NYSE:MXL). KCL Capital had $11 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley's Polar Capital also initiated a $9.7 million position during the quarter. The following funds were also among the new MXL investors: Josh Goldberg's G2 Investment Partners Management, Jerry Kochanski's Shelter Haven Capital Management, and Cliff Asness's AQR Capital Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as MaxLinear, Inc. (NYSE:MXL) but similarly valued. These stocks are Hub Group Inc (NASDAQ:HUBG), Sunstone Hotel Investors Inc (NYSE:SHO), Sonic Automotive Inc (NYSE:SAH), Piedmont Office Realty Trust, Inc. (NYSE:PDM), Columbia Banking System Inc (NASDAQ:COLB), Oi SA (NYSE:OIBR), and CareTrust REIT Inc (NASDAQ:CTRE). This group of stocks' market values resemble MXL's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HUBG,20,191042,-1 SHO,17,191049,-6 SAH,17,81089,5 PDM,14,46030,3 COLB,11,77178,2 OIBR,6,70582,-1 CTRE,19,128517,0 Average,14.9,112212,0.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $112 million. That figure was $77 million in MXL's case. Hub Group Inc (NASDAQ:HUBG) is the most popular stock in this table. On the other hand Oi SA (NYSE:OIBR) is the least popular one with only 6 bullish hedge fund positions. MaxLinear, Inc. (NYSE:MXL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MXL is 69.5. 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 gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on MXL as the stock returned 30.5% since the end of Q3 (through 12/14) 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.