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Is NXP Semiconductors NV (NXPI) Going to Burn These Hedge Funds?

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The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn't the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds' positions on March 31st. We at Insider Monkey have made an extensive database of more than 866 of those established hedge funds and famous value investors' filings. In this article, we analyze how these elite funds and prominent investors traded NXP Semiconductors NV (NASDAQ:NXPI) based on those filings.

Is NXP Semiconductors NV (NASDAQ:NXPI) a buy, sell, or hold? The best stock pickers were getting less bullish. The number of bullish hedge fund bets fell by 13 recently. NXP Semiconductors NV (NASDAQ:NXPI) was in 53 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 93. Our calculations also showed that NXPI isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 66 hedge funds in our database with NXPI positions at the end of the fourth quarter.

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 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Billionaire Steve Cohen's Top 10 stock picks
Billionaire Steve Cohen's Top 10 stock picks

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $29 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 surrounding NXP Semiconductors NV (NASDAQ:NXPI).

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

At the end of March, a total of 53 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from the fourth quarter of 2020. By comparison, 52 hedge funds held shares or bullish call options in NXPI a year ago. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is NXPI A Good Stock To Buy?
Is NXPI A Good Stock To Buy?

The largest stake in NXP Semiconductors NV (NASDAQ:NXPI) was held by Fisher Asset Management, which reported holding $211.6 million worth of stock at the end of December. It was followed by Point72 Asset Management with a $158.2 million position. Other investors bullish on the company included First Pacific Advisors LLC, Citadel Investment Group, and Suvretta Capital Management. In terms of the portfolio weights assigned to each position Engine No. 1 LLC allocated the biggest weight to NXP Semiconductors NV (NASDAQ:NXPI), around 10.71% of its 13F portfolio. Mountain Road Advisors is also relatively very bullish on the stock, earmarking 8.84 percent of its 13F equity portfolio to NXPI.

Seeing as NXP Semiconductors NV (NASDAQ:NXPI) has experienced bearish sentiment from hedge fund managers, it's safe to say that there lies a certain "tier" of fund managers that slashed their full holdings by the end of the first quarter. It's worth mentioning that Alex Sacerdote's Whale Rock Capital Management dumped the biggest investment of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $430.4 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital was right behind this move, as the fund dumped about $68.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 13 funds by the end of the first quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as NXP Semiconductors NV (NASDAQ:NXPI) but similarly valued. We will take a look at Prudential Public Limited Company (NYSE:PUK), Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR), Stellantis N.V. (NYSE:STLA), ICICI Bank Limited (NYSE:IBN), UBS Group AG (NYSE:UBS), Eaton Corporation plc (NYSE:ETN), and Boston Scientific Corporation (NYSE:BSX). All of these stocks' market caps are similar to NXPI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PUK,2,4640,0 PBR,27,878461,3 STLA,21,751799,6 IBN,31,1903240,2 UBS,16,342177,-2 ETN,49,1094688,8 BSX,44,2884401,-14 Average,27.1,1122772,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $1123 million. That figure was $1719 million in NXPI's case. Eaton Corporation plc (NYSE:ETN) is the most popular stock in this table. On the other hand Prudential Public Limited Company (NYSE:PUK) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks NXP Semiconductors NV (NASDAQ:NXPI) is more popular among hedge funds. Our overall hedge fund sentiment score for NXPI is 59.1. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. Unfortunately NXPI wasn't nearly as popular as these 5 stocks and hedge funds that were betting on NXPI were disappointed as the stock returned -0.1% since the end of the first quarter (through 6/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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