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We can judge whether Photronics, Inc. (NASDAQ:PLAB) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There's no better way to get these firms' immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market when we factor in known risk factors.
Photronics, Inc. (NASDAQ:PLAB) investors should be aware of an increase in support from the world's most elite money managers recently. PLAB was in 18 hedge funds' portfolios at the end of September. There were 17 hedge funds in our database with PLAB holdings at the end of the previous quarter. Our calculations also showed that PLAB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to 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 hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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Paul Marshall of Marshall Wace[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to analyze the new hedge fund action regarding Photronics, Inc. (NASDAQ:PLAB).
What have hedge funds been doing with Photronics, Inc. (NASDAQ:PLAB)?
Heading into the fourth quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in PLAB over the last 17 quarters. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Photronics, Inc. (NASDAQ:PLAB), which was worth $26.9 million at the end of the third quarter. On the second spot was Divisar Capital which amassed $12.4 million worth of shares. Royce & Associates, AQR Capital Management, and Marshall Wace 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 Divisar Capital allocated the biggest weight to Photronics, Inc. (NASDAQ:PLAB), around 4.13% of its 13F portfolio. Factorial Partners is also relatively very bullish on the stock, designating 0.69 percent of its 13F equity portfolio to PLAB.
As industrywide interest jumped, key money managers were breaking ground themselves. Winton Capital Management, managed by David Harding, initiated the most valuable position in Photronics, Inc. (NASDAQ:PLAB). Winton Capital Management had $1.2 million invested in the company at the end of the quarter. Minhua Zhang's Weld Capital Management also made a $0.8 million investment in the stock during the quarter. The following funds were also among the new PLAB investors: Alec Litowitz and Ross Laser's Magnetar Capital, Matthew Hulsizer's PEAK6 Capital Management, and Thomas Bailard's Bailard Inc.
Let's also examine hedge fund activity in other stocks similar to Photronics, Inc. (NASDAQ:PLAB). We will take a look at CrossFirst Bankshares, Inc. (NASDAQ:CFB), Sturm, Ruger & Company, Inc. (NYSE:RGR), Oaktree Specialty Lending Corporation (NASDAQ:OCSL), and Regis Corporation (NYSE:RGS). This group of stocks' market values are similar to PLAB's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CFB,6,20314,6 RGR,16,88127,3 OCSL,18,74388,1 RGS,13,289738,-1 Average,13.25,118142,2.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $118 million. That figure was $89 million in PLAB's case. Oaktree Specialty Lending Corporation (NASDAQ:OCSL) is the most popular stock in this table. On the other hand CrossFirst Bankshares, Inc. (NASDAQ:CFB) is the least popular one with only 6 bullish hedge fund positions. Photronics, Inc. (NASDAQ:PLAB) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on PLAB, though not to the same extent, as the stock returned 8.1% during the first two months of the fourth quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.