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Did Hedge Funds Make The Right Call On Skyworks Solutions Inc (SWKS) ?

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 Skyworks Solutions Inc (NASDAQ:SWKS) and determine whether hedge funds skillfully traded this stock.

Skyworks Solutions Inc (NASDAQ:SWKS) investors should pay attention to a decrease in hedge fund interest of late. Our calculations also showed that SWKS 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).

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

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Clint Carlson of Carlson Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the latest hedge fund action encompassing Skyworks Solutions Inc (NASDAQ:SWKS).

How are hedge funds trading Skyworks Solutions Inc (NASDAQ:SWKS)?

At Q1’s end, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in SWKS over the last 18 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Is SWKS A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, Cliff Asness’s AQR Capital Management has the most valuable position in Skyworks Solutions Inc (NASDAQ:SWKS), worth close to $313.5 million, corresponding to 0.5% of its total 13F portfolio. On AQR Capital Management’s heels is Platinum Asset Management, managed by Kerr Neilson, which holds a $207.4 million position; the fund has 5.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism contain  Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Platinum Asset Management allocated the biggest weight to Skyworks Solutions Inc (NASDAQ:SWKS), around 5.24% of its 13F portfolio. Bronson Point Partners is also relatively very bullish on the stock, designating 2.18 percent of its 13F equity portfolio to SWKS.

Because Skyworks Solutions Inc (NASDAQ:SWKS) has faced falling interest from the entirety of the hedge funds we track, we can see that there were a few funds who sold off their entire stakes heading into Q4. At the top of the heap, Ken Heebner’s Capital Growth Management dropped the biggest position of the “upper crust” of funds tracked by Insider Monkey, valued at about $38.1 million in stock, and John Hurley’s Cavalry Asset Management was right behind this move, as the fund dropped about $35.2 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 14 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Skyworks Solutions Inc (NASDAQ:SWKS). These stocks are BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), Marvell Technology Group Ltd. (NASDAQ:MRVL), Okta, Inc. (NASDAQ:OKTA), and Carrier Global Corporation (NYSE:CARR). All of these stocks’ market caps are closest to SWKS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BMRN 54 1567492 5
MRVL 29 498283 0
OKTA 48 1086612 9
CARR 3 9338 3
Average 33.5 790431 4.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.5 hedge funds with bullish positions and the average amount invested in these stocks was $790 million. That figure was $769 million in SWKS’s case. BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is the most popular stock in this table. On the other hand Carrier Global Corporation (NYSE:CARR) is the least popular one with only 3 bullish hedge fund positions. Skyworks Solutions Inc (NASDAQ:SWKS) is not the least popular stock in this group but hedge fund interest is still below average. 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 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. A small number of hedge funds were also right about betting on SWKS as the stock returned 43.6% during the second quarter and outperformed the market by an even larger margin.

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