Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards Applied Micro Circuits Corporation (NASDAQ:AMCC).
Applied Micro Circuits Corporation (NASDAQ:AMCC) was in 11 hedge funds’ portfolios at the end of the third quarter of 2015. AMCC has experienced a decrease in enthusiasm from smart money of late. There were 14 hedge funds in our database with AMCC holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as AG Mortgage Investment Trust Inc (NYSE:MITT), LivePerson, Inc. (NASDAQ:LPSN), and FutureFuel Corp. (NYSE:FF) to gather more data points.
If you’d ask most market participants, hedge funds are perceived as unimportant, old financial tools of years past. While there are more than 8000 funds in operation at the moment, Our researchers choose to focus on the moguls of this group, about 700 funds. These money managers oversee the majority of the hedge fund industry’s total asset base, and by paying attention to their highest performing picks, Insider Monkey has deciphered many investment strategies that have historically surpassed the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.
With all of this in mind, we’re going to analyze the recent action encompassing Applied Micro Circuits Corporation (NASDAQ:AMCC).
How have hedgies been trading Applied Micro Circuits Corporation (NASDAQ:AMCC)?
At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the previous quarter. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Kingdom Ridge Capital, managed by Christopher Zepf and Brian Thonn, holds the biggest position in Applied Micro Circuits Corporation (NASDAQ:AMCC). Kingdom Ridge Capital has a $42 million position in the stock, comprising 24.6% of its 13F portfolio. The second largest stake is held by White Elm Capital, led by Matthew Iorio, holding a $18.2 million position; 1.9% of its 13F portfolio is allocated to the stock. Some other members of the smart money that are bullish encompass Legg Mason Capital Management, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw.
Since Applied Micro Circuits Corporation (NASDAQ:AMCC) has witnessed a declination in interest from the aggregate hedge fund industry, it’s safe to say that there exists a select few hedgies who were dropping their positions entirely in the third quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest investment of the 700 funds watched by Insider Monkey, comprising about $0.2 million in stock. Richard Driehaus’s fund, Driehaus Capital, also cut its stock, about $0.1 million worth. These transactions are interesting, as total hedge fund interest dropped by 3 funds in the third quarter.
Let’s check out hedge fund activity in other stocks similar to Applied Micro Circuits Corporation (NASDAQ:AMCC). These stocks are AG Mortgage Investment Trust Inc (NYSE:MITT), LivePerson, Inc. (NASDAQ:LPSN), FutureFuel Corp. (NYSE:FF), and Otonomy Inc (NASDAQ:OTIC). This group of stocks’ market valuations match AMCC’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $52 million, while in AMCC’s case, that figure stood at $70 million. LivePerson, Inc. (NASDAQ:LPSN) is the most popular stock in this table. On the other hand AG Mortgage Investment Trust Inc (NYSE:MITT) is the least popular one with only 7 bullish hedge fund positions. Applied Micro Circuits Corporation (NASDAQ:AMCC) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LPSN might be a better candidate to consider a long position.