There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don't cover. Because of Carl Icahn and other elite funds' exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Photronics, Inc. (NASDAQ:PLAB).
Photronics, Inc. (NASDAQ:PLAB) has seen an increase in support from the world's most elite money managers of late. PLAB was in 14 hedge funds' portfolios at the end of the third quarter of 2018. There were 12 hedge funds in our database with PLAB positions at the end of the previous quarter. Our calculations also showed that PLAB isn't among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We're going to review the fresh hedge fund action encompassing Photronics, Inc. (NASDAQ:PLAB).
How are hedge funds trading Photronics, Inc. (NASDAQ:PLAB)?
At Q3's end, a total of 14 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in PLAB over the last 13 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of notable hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
The largest stake in Photronics, Inc. (NASDAQ:PLAB) was held by Renaissance Technologies, which reported holding $19 million worth of stock at the end of September. It was followed by Royce & Associates with a $12.5 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and Two Sigma Advisors.
As one would reasonably expect, key money managers have been driving this bullishness. Gotham Asset Management, managed by Joel Greenblatt, established the biggest position in Photronics, Inc. (NASDAQ:PLAB). Gotham Asset Management had $0.2 million invested in the company at the end of the quarter. Mike Vranos's Ellington also made a $0.1 million investment in the stock during the quarter. The following funds were also among the new PLAB investors: Ken Griffin's Citadel Investment Group and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital.
Let's go over hedge fund activity in other stocks similar to Photronics, Inc. (NASDAQ:PLAB). These stocks are MCBC Holdings Inc (NASDAQ:MCFT), Navigator Holdings Ltd (NYSE:NVGS), Zumiez Inc. (NASDAQ:ZUMZ), and ANI Pharmaceuticals Inc (NASDAQ:ANIP). This group of stocks' market valuations are closest to PLAB's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MCFT,22,154523,0 NVGS,8,309367,-2 ZUMZ,17,50413,-1 ANIP,17,59526,6 Average,16,143457,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $70 million in PLAB's case. MCBC Holdings Inc (NASDAQ:MCFT) is the most popular stock in this table. On the other hand Navigator Holdings Ltd (NYSE:NVGS) is the least popular one with only 8 bullish hedge fund positions. Photronics, Inc. (NASDAQ:PLAB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard MCFT might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.