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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider SMTC Corporation (NASDAQ:SMTX) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Hedge fund interest in SMTC Corporation (NASDAQ:SMTX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that SMTX 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). The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as First Community Corporation (NASDAQ:FCCO), First Northwest Bancorp (NASDAQ:FNWB), and Xinyuan Real Estate Co., Ltd. (NYSE:XIN) to gather more data points.
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.
Nelson Obus of Wynnefield CapitalNelson Obus
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. Keeping this in mind we're going to check out the fresh hedge fund action regarding SMTC Corporation (NASDAQ:SMTX).
What have hedge funds been doing with SMTC Corporation (NASDAQ:SMTX)?
Heading into the fourth quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in SMTX over the last 21 quarters. With hedgies' capital changing hands, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
Among these funds, Wynnefield Capital held the most valuable stake in SMTC Corporation (NASDAQ:SMTX), which was worth $7.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.3 million worth of shares. Millennium Management, Royce & Associates, and LMR Partners 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 Wynnefield Capital allocated the biggest weight to SMTC Corporation (NASDAQ:SMTX), around 4.51% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to SMTX.
Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren't any hedge funds dumping their holdings during the third quarter, there weren't any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven't identified any viable catalysts that can attract investor attention.
Let's now review hedge fund activity in other stocks similar to SMTC Corporation (NASDAQ:SMTX). These stocks are First Community Corporation (NASDAQ:FCCO), First Northwest Bancorp (NASDAQ:FNWB), Xinyuan Real Estate Co., Ltd. (NYSE:XIN), Plumas Bancorp (NASDAQ:PLBC), ReneSola Ltd. (NYSE:SOL), Mackinac Financial Corporation (NASDAQ:MFNC), and Information Services Group, Inc. (NASDAQ:III). This group of stocks' market valuations match SMTX's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FCCO,2,3561,0 FNWB,3,11600,0 XIN,3,514,1 PLBC,1,4439,0 SOL,5,31435,2 MFNC,6,7619,2 III,5,18567,0 Average,3.6,11105,0.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 3.6 hedge funds with bullish positions and the average amount invested in these stocks was $11 million. That figure was $10 million in SMTX's case. Mackinac Financial Corporation (NASDAQ:MFNC) is the most popular stock in this table. On the other hand Plumas Bancorp (NASDAQ:PLBC) is the least popular one with only 1 bullish hedge fund positions. SMTC Corporation (NASDAQ:SMTX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SMTX is 75. 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 November 27th and still beat the market by 16.1 percentage points. Hedge funds were also right about betting on SMTX as the stock returned 30.4% since the end of Q3 (through 11/27) 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.