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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Xilinx, Inc. (NASDAQ:XLNX) to find out whether there were any major changes in hedge funds' views.
Is XLNX a good stock to buy now? Xilinx, Inc. (NASDAQ:XLNX) investors should pay attention to a decrease in support from the world's most elite money managers lately. Xilinx, Inc. (NASDAQ:XLNX) was in 46 hedge funds' portfolios at the end of September. The all time high for this statistic is 56. There were 47 hedge funds in our database with XLNX holdings at the end of June. Our calculations also showed that XLNX 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).
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.
Gil Simon of SoMa Equity Partners
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy 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. Now we're going to take a peek at the fresh hedge fund action encompassing Xilinx, Inc. (NASDAQ:XLNX).
Do Hedge Funds Think XLNX Is A Good Stock To Buy Now?
At the end of September, a total of 46 of the hedge funds tracked by Insider Monkey were long this stock, a change of -2% from the previous quarter. By comparison, 43 hedge funds held shares or bullish call options in XLNX a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, David Goel and Paul Ferri's Matrix Capital Management has the largest position in Xilinx, Inc. (NASDAQ:XLNX), worth close to $218.9 million, accounting for 2.9% of its total 13F portfolio. On Matrix Capital Management's heels is Gil Simon of SoMa Equity Partners, with a $208.5 million position; 6.7% of its 13F portfolio is allocated to the company. Remaining members of the smart money that are bullish comprise Brian Ashford-Russell and Tim Woolley's Polar Capital, Panayotis Takis Sparaggis's Alkeon Capital Management and Renaissance Technologies. In terms of the portfolio weights assigned to each position SoMa Equity Partners allocated the biggest weight to Xilinx, Inc. (NASDAQ:XLNX), around 6.67% of its 13F portfolio. Crestwood Capital Management is also relatively very bullish on the stock, setting aside 3.69 percent of its 13F equity portfolio to XLNX.
Because Xilinx, Inc. (NASDAQ:XLNX) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of hedge funds that slashed their positions entirely last quarter. At the top of the heap, Gavin Baker's Atreides Management said goodbye to the largest position of the "upper crust" of funds tracked by Insider Monkey, valued at about $26 million in stock, and Ian Simm's Impax Asset Management was right behind this move, as the fund sold off about $14.2 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to Xilinx, Inc. (NASDAQ:XLNX). These stocks are Prudential Financial Inc (NYSE:PRU), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Pinterest, Inc. (NYSE:PINS), ResMed Inc. (NYSE:RMD), Tencent Music Entertainment Group (NYSE:TME), Aptiv PLC (NYSE:APTV), and Fiat Chrysler Automobiles NV (NYSE:FCAU). This group of stocks' market values are similar to XLNX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRU,34,479419,8 ALXN,58,3776330,1 PINS,80,3484050,27 RMD,35,236573,10 TME,24,571503,-6 APTV,38,1355332,-5 FCAU,20,218304,0 Average,41.3,1445930,5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 41.3 hedge funds with bullish positions and the average amount invested in these stocks was $1446 million. That figure was $1199 million in XLNX's case. Pinterest, Inc. (NYSE:PINS) is the most popular stock in this table. On the other hand Fiat Chrysler Automobiles NV (NYSE:FCAU) is the least popular one with only 20 bullish hedge fund positions. Xilinx, Inc. (NASDAQ:XLNX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for XLNX is 50.3. 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 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. Hedge funds were also right about betting on XLNX as the stock returned 40.6% since the end of Q3 (through 12/8) 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.