The new Trump administration has not been kind to the high flying technology sector. “FANG” stocks saw selling post the elections, as investors grew concerned that the new trade policies would adversely affect the technology sector which relies largely on earnings from foreign countries. It was feared that other countries might retaliate against tariffs and other restrictive trade measures imposed on the imports of their goods by the United States. In this article we look at some of the technology stocks that were already out of favor amongst hedge funds even before the election results.
Through extensive research, we determined that imitating some of the picks of hedge funds and other institutional investors can help generate market-beating returns over the long run. The key is to focus on the small-cap picks of these investors, since they are usually less followed by the broader market and are less price-efficient. Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
ON Semiconductor Corp. (NASDAQ:ON) is a $5.4 billion semiconductor company that sells images sensors, analog, digital and mixed signal integrated circuits (ICs) to customers. During the third quarter, 13 hedge funds sold their entire position in the stock while Skylands Capital and Richard Pzena’s Pzena Investment Management reduced their holdings in the stock. D.E. Shaw also reduced the holding of this stock by 1.82 million shares during the quarter. The stock have given a return of 22% over the last one year and trades at an earnings multiple of 41x. The analyst community is mostly bullish on this stock with none of the 21 analysts covering the stock rating it as a sell. The company had recently made an offer to buyout Fairchild Semiconductor Intl Inc. (NASDAQ:FCS) for $20 per share in a $2.4 billion deal. The number of funds from our system, having ON Semiconductor Corp. (NASDAQ:ON) in their portfolios also came down to 21 in the third quarter, from 33 in the quarter earlier.