Did Hedge Funds Make The Right Call On Kulicke and Soffa Industries Inc. (KLIC) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) and determine whether hedge funds skillfully traded this stock.

Is Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) a good investment today? Prominent investors were becoming less confident. The number of long hedge fund positions were cut by 3 recently. Our calculations also showed that KLIC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). KLIC was in 19 hedge funds’ portfolios at the end of March. There were 22 hedge funds in our database with KLIC holdings at the end of the previous quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are viewed as unimportant, old financial vehicles of yesteryear. While there are greater than 8000 funds in operation at the moment, We hone in on the leaders of this group, approximately 850 funds. Most estimates calculate that this group of people control the lion’s share of the hedge fund industry’s total asset base, and by monitoring their best equity investments, Insider Monkey has unsheathed many investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to analyze the latest hedge fund action regarding Kulicke and Soffa Industries Inc. (NASDAQ:KLIC).

How are hedge funds trading Kulicke and Soffa Industries Inc. (NASDAQ:KLIC)?

At Q1’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards KLIC over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is KLIC A Good Stock To Buy?

Among these funds, Whale Rock Capital Management held the most valuable stake in Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), which was worth $82.6 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $57.8 million worth of shares. D E Shaw, Divisar Capital, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), around 5.43% of its 13F portfolio. No Street Capital is also relatively very bullish on the stock, earmarking 1.43 percent of its 13F equity portfolio to KLIC.

Seeing as Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) has faced bearish sentiment from the smart money, it’s safe to say that there were a few money managers that elected to cut their entire stakes in the first quarter. Interestingly, Ravee Mehta’s Nishkama Capital dropped the biggest stake of all the hedgies tracked by Insider Monkey, valued at about $10.4 million in stock, and Israel Englander’s Millennium Management was right behind this move, as the fund cut about $10 million worth. These transactions are important to note, as aggregate hedge fund interest dropped by 3 funds in the first quarter.

Let’s check out hedge fund activity in other stocks similar to Kulicke and Soffa Industries Inc. (NASDAQ:KLIC). These stocks are Cortexyme, Inc. (NASDAQ:CRTX), AtriCure Inc. (NASDAQ:ATRC), Green Dot Corporation (NYSE:GDOT), and Brooge Energy Limited (NASDAQ:BROG). All of these stocks’ market caps resemble KLIC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CRTX 6 14838 5
ATRC 20 185400 2
GDOT 22 376626 -1
BROG 7 49414 4
Average 13.75 156570 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $157 million. That figure was $231 million in KLIC’s case. Green Dot Corporation (NYSE:GDOT) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 6 bullish hedge fund positions. Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately KLIC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on KLIC were disappointed as the stock returned 22.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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Disclosure: None. This article was originally published at Insider Monkey.