Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Alliance Fiber Optic Products Inc (NASDAQ:AFOP) changed recently.
Alliance Fiber Optic Products has seen an increase in enthusiasm from smart money recently. AFOP was in 14 hedge funds’ portfolios at the end of September. There were 11 hedge funds in our database with AFOP holdings 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 Checkpoint Systems, Inc. (NYSE:CKP), Carbonite Inc (NASDAQ:CARB), and Park Sterling Bank (NASDAQ:PSTB) to gather more data points.
According to most market participants, hedge funds are seen as unimportant, outdated financial tools of the past. While there are more than 8000 funds with their doors open today, We hone in on the top tier of this group, around 700 funds. Most estimates calculate that this group of people watch over the lion’s share of the smart money’s total capital, and by tracking their top equity investments, Insider Monkey has spotted numerous investment strategies that have historically outrun Mr. Market. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points per year for a decade in their back tests.
With all of this in mind, let’s view the recent action surrounding Alliance Fiber Optic Products Inc (NASDAQ:AFOP).
What have hedge funds been doing with Alliance Fiber Optic Products Inc (NASDAQ:AFOP)?
At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies holds the most valuable position in Alliance Fiber Optic Products Inc (NASDAQ:AFOP). Renaissance Technologies has a $8.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is AQR Capital Management, led by Cliff Asness, holding a $2.5 million position; less than 0.1%% of its 13F portfolio is allocated to the company. The remaining members of the smart money that are bullish consist of Peter Alger and Kevin Coldiron’s Algert Coldiron Investors, Israel Englander’s Millennium Management and Chuck Royce’s Royce & Associates.