Hedge fund activity is an important indicator to follow. On an aggregate level, individual investors can use the smart money’s sentiment toward a particular stock as a general indicator of whether or not to be bullish. At Insider Monkey, our empirical research shows that individuals who mimic hedge funds can beat the market by double-digits annually (see the details of our market-beating strategy here).
S&P holds an optimistic outlook for the semiconductors industry over the next year, citing that “a fairly lean inventory supply chain [is expected] to leave the supply-demand balance even-to-slightly favorable for inventory replenishment,” forecasting growth of 4%. By using 13F filings from the SEC, we can chronicle just how the hedge fund industry’s top players are playing this trend.
Of the 400+ hedge funds we track, Intel Corporation (NASDAQ:INTC) was the most loved semiconductor company at the end of the last filing period, with 44 funds invested. Intel was down in 2012, but has been a relatively good investment since the start of the New Year, gaining 7.1% year-to-date. This appreciation seems to be a factor of: (1) anticipation of the company’s Q4 earnings, and buzz over its CES mobile unveiling.
The company reports its earnings this Thursday, and analysts are expecting a 30% growth in Intel’s bottom line, totaling a 45-cent EPS. Intel is looking to make it a perfect four-for-four in terms of EPS beats in its 2012 fiscal year, and at a mere 11.3 times forward earnings, investors could see a value-based appreciation in the near future.
In second place, we have Broadcom Corporation (NASDAQ:BRCM), with 32 hedge funds holding positions in the key Apple supplier. We’ve covered Broadcom before (see Broadcom: More Than Just an Apple Supplier), but the bullish thesis surrounding this chipmaker seems to boil down to one thing: 5G WiFi. Broadcom was the first to introduce the chip last year, and is one step ahead of its competitors in 2013.
The company recently announced that it would power LG’s newest smart TV, and that it would manufacture its own set-top box with 5G WiFi. Partnerships with Samsung, NetGear and Comcast also bode well for Broadcom’s future, and it’s a possibility that more Apple connectivity is in store. At a forward P/E below 12x, there’s obvious value to be had with Broadcom’s outstanding growth potential.
Who’s the best of the rest?