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Did Hedge Funds Make The Right Call On Xilinx, Inc. (XLNX) ?

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 Xilinx, Inc. (NASDAQ:XLNX) and determine whether hedge funds skillfully traded this stock.

Xilinx, Inc. (NASDAQ:XLNX) has seen a decrease in hedge fund interest lately. XLNX was in 38 hedge funds’ portfolios at the end of the first quarter of 2020. There were 42 hedge funds in our database with XLNX positions at the end of the previous quarter. Our calculations also showed that XLNX 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.

To most shareholders, hedge funds are assumed to be slow, outdated financial tools of the past. While there are greater than 8000 funds with their doors open today, Our experts choose to focus on the moguls of this club, about 850 funds. These hedge fund managers handle the majority of all hedge funds’ total asset base, and by monitoring their top equity investments, Insider Monkey has revealed a number of investment strategies that have historically surpassed the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum 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 .

Gil Simon of SoMa Equity Partners

Gil Simon of SoMa Equity Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind let’s take a look at the new hedge fund action regarding Xilinx, Inc. (NASDAQ:XLNX).

How are hedge funds trading Xilinx, Inc. (NASDAQ:XLNX)?

At the end of the first quarter, a total of 38 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the fourth quarter of 2019. On the other hand, there were a total of 56 hedge funds with a bullish position in XLNX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

Among these funds, Matrix Capital Management held the most valuable stake in Xilinx, Inc. (NASDAQ:XLNX), which was worth $172.6 million at the end of the third quarter. On the second spot was SoMa Equity Partners which amassed $124.7 million worth of shares. AQR Capital Management, Alkeon Capital Management, and Citadel Investment Group 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 Bronson Point Partners allocated the biggest weight to Xilinx, Inc. (NASDAQ:XLNX), around 7.68% of its 13F portfolio. SoMa Equity Partners is also relatively very bullish on the stock, dishing out 7 percent of its 13F equity portfolio to XLNX.

Because Xilinx, Inc. (NASDAQ:XLNX) has experienced a decline in interest from hedge fund managers, it’s easy to see that there is a sect of fund managers that elected to cut their full holdings by the end of the first quarter. Intriguingly, Steve Cohen’s Point72 Asset Management dumped the largest position of the “upper crust” of funds followed by Insider Monkey, totaling close to $128.5 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also sold off its stock, about $80.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 4 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks similar to Xilinx, Inc. (NASDAQ:XLNX). These stocks are Synopsys, Inc. (NASDAQ:SNPS), Twitter Inc (NYSE:TWTR), Ford Motor Company (NYSE:F), and Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK). This group of stocks’ market caps match XLNX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SNPS 31 725655 -14
TWTR 55 990334 0
F 33 667079 -3
TLK 7 151891 -1
Average 31.5 633740 -4.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.5 hedge funds with bullish positions and the average amount invested in these stocks was $634 million. That figure was $636 million in XLNX’s case. Twitter Inc (NYSE:TWTR) is the most popular stock in this table. On the other hand Perusahaan Perseroan (Persero) PT Telekomunikasi Indonesia Tbk (NYSE:TLK) is the least popular one with only 7 bullish hedge fund positions. Xilinx, Inc. (NASDAQ:XLNX) is not the most popular stock in this group but hedge fund interest is still above 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 but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on XLNX as the stock returned 26.8% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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