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Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors' consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of SiTime Corporation (NASDAQ:SITM).
Is SiTime Corporation (NASDAQ:SITM) a buy here? Money managers were reducing their bets on the stock. The number of bullish hedge fund positions were cut by 6 lately. SiTime Corporation (NASDAQ:SITM) was in 6 hedge funds' portfolios at the end of September. The all time high for this statistics is 12. Our calculations also showed that SITM 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 12 hedge funds in our database with SITM holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Richard Driehaus of Driehaus Capital
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 let's take a look at the latest hedge fund action regarding SiTime Corporation (NASDAQ:SITM).
What does smart money think about SiTime Corporation (NASDAQ:SITM)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey were long this stock, a change of -50% from the second quarter of 2020. On the other hand, there were a total of 0 hedge funds with a bullish position in SITM a year ago. With hedge funds' sentiment swirling, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
The largest stake in SiTime Corporation (NASDAQ:SITM) was held by Driehaus Capital, which reported holding $64.2 million worth of stock at the end of September. It was followed by Trigran Investments with a $21.3 million position. Other investors bullish on the company included Aubrey Capital Management, Two Sigma Advisors, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Trigran Investments allocated the biggest weight to SiTime Corporation (NASDAQ:SITM), around 3.85% of its 13F portfolio. Aubrey Capital Management is also relatively very bullish on the stock, dishing out 2.62 percent of its 13F equity portfolio to SITM.
Judging by the fact that SiTime Corporation (NASDAQ:SITM) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers who sold off their full holdings last quarter. At the top of the heap, Ryan Tolkin (CIO)'s Schonfeld Strategic Advisors cut the largest stake of the 750 funds tracked by Insider Monkey, comprising an estimated $8.2 million in stock, and Matthew L Pinz's Pinz Capital was right behind this move, as the fund dropped about $1.7 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 6 funds last quarter.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as SiTime Corporation (NASDAQ:SITM) but similarly valued. These stocks are YPF Sociedad Anonima (NYSE:YPF), OSI Systems, Inc. (NASDAQ:OSIS), Freedom Holding Corp. (NASDAQ:FRHC), PQ Group Holdings Inc. (NYSE:PQG), ALX Oncology Holdings Inc. (NASDAQ:ALXO), Two Harbors Investment Corp (NYSE:TWO), and Axos Financial, Inc. (NYSE:AX). This group of stocks' market caps are similar to SITM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position YPF,5,8535,-3 OSIS,17,70797,4 FRHC,6,26711,3 PQG,13,36502,7 ALXO,9,361214,9 TWO,17,36539,1 AX,15,48303,-2 Average,11.7,84086,2.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $98 million in SITM's case. OSI Systems, Inc. (NASDAQ:OSIS) is the most popular stock in this table. On the other hand YPF Sociedad Anonima (NYSE:YPF) is the least popular one with only 5 bullish hedge fund positions. SiTime Corporation (NASDAQ:SITM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SITM is 18.2. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. 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 November 27th and surpassed the market again by 16.1 percentage points. Unfortunately SITM wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SITM investors were disappointed as the stock returned 5% since the end of September (through 11/27) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.