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Diodes Incorporated (DIOD): Are Hedge Funds Right About This Stock?

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Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Diodes Incorporated (NASDAQ:DIOD) from the perspective of those successful funds.

Is Diodes Incorporated (NASDAQ:DIOD) a buy right now? Money managers are actually in an optimistic mood. The number of long hedge fund positions advanced by 1 lately. DIODwas in 8 hedge funds’ portfolios at the end of the third quarter of 2016. There were 7 hedge funds in our database with DIOD positions at the end of the previous quarter. 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 MacroGenics Inc (NASDAQ:MGNX), Clayton Williams Energy, Inc. (NASDAQ:CWEI), and NCI Building Systems, Inc. (NYSE:NCS) to gather more data points.

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At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, let’s review the new action encompassing Diodes Incorporated (NASDAQ:DIOD).

How have hedgies been trading Diodes Incorporated (NASDAQ:DIOD)?

Heading into the fourth quarter of 2016, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, up 14% from the second quarter of 2016. The graph below displays the number of hedge funds with bullish position in DIOD over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

HedgeFundSentimentChart

Of the funds tracked by Insider Monkey, Pzena Investment Management, led by Richard S. Pzena, holds the most valuable position in Diodes Incorporated (NASDAQ:DIOD). According to regulatory filings, the fund has a $33.8 million position in the stock, comprising 0.2% of its 13F portfolio. Coming in second is Chuck Royce of Royce & Associates, with a $17.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism comprise Renaissance Technologies, one of the biggest hedge funds in the world, Ken Griffin’s Citadel Investment Group and David E. Shaw’s D E Shaw. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

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