Diodes Incorporated (DIOD): Hedge Fund Sentiment Down From All Time High

Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Diodes Incorporated (NASDAQ:DIOD).

Diodes Incorporated (NASDAQ:DIOD) investors should pay attention to a decrease in activity from the world’s largest hedge funds recently. DIOD was in 18 hedge funds’ portfolios at the end of June. There were 19 hedge funds in our database with DIOD positions at the end of the previous quarter. Our calculations also showed that DIOD isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

According to most investors, hedge funds are viewed as worthless, outdated investment vehicles of the past. While there are more than 8000 funds trading at present, Our experts hone in on the leaders of this group, approximately 750 funds. These money managers shepherd most of the smart money’s total asset base, and by watching their highest performing equity investments, Insider Monkey has deciphered a number of investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship hedge fund strategy defeated the S&P 500 index by around 5 percentage points annually since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .


Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to view the new hedge fund action regarding Diodes Incorporated (NASDAQ:DIOD).

What have hedge funds been doing with Diodes Incorporated (NASDAQ:DIOD)?

Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -5% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in DIOD a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with DIOD Positions

Among these funds, Hawk Ridge Management held the most valuable stake in Diodes Incorporated (NASDAQ:DIOD), which was worth $27.3 million at the end of the second quarter. On the second spot was Royce & Associates which amassed $17.5 million worth of shares. Moreover, Fisher Asset Management, Marshall Wace LLP, and Gotham Asset Management were also bullish on Diodes Incorporated (NASDAQ:DIOD), allocating a large percentage of their portfolios to this stock.

Since Diodes Incorporated (NASDAQ:DIOD) has witnessed declining sentiment from hedge fund managers, it’s safe to say that there were a few money managers that elected to cut their entire stakes last quarter. At the top of the heap, David Costen Haley’s HBK Investments dumped the largest investment of the “upper crust” of funds watched by Insider Monkey, worth close to $1.9 million in call options, and Frank Slattery’s Symmetry Peak Management was right behind this move, as the fund sold off about $1.5 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Diodes Incorporated (NASDAQ:DIOD) but similarly valued. These stocks are SPS Commerce, Inc. (NASDAQ:SPSC), LivePerson, Inc. (NASDAQ:LPSN), BGC Partners, Inc. (NASDAQ:BGCP), and Arcosa, Inc. (NYSE:ACA). This group of stocks’ market values resemble DIOD’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SPSC 18 170860 -1
LPSN 17 174378 -4
BGCP 25 249426 -1
ACA 24 328959 -1
Average 21 230906 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $114 million in DIOD’s case. BGC Partners, Inc. (NASDAQ:BGCP) is the most popular stock in this table. On the other hand LivePerson, Inc. (NASDAQ:LPSN) is the least popular one with only 17 bullish hedge fund positions. Diodes Incorporated (NASDAQ:DIOD) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on DIOD as the stock returned 10.4% during the same time frame and outperformed the market by an even larger margin.

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