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Hedge Funds Are Buying Analog Devices, Inc. (ADI)

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Analog Devices, Inc. (NASDAQ:ADI) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Analog Devices, Inc. (NASDAQ:ADI) has seen an increase in enthusiasm from smart money recently. Analog Devices, Inc. (NASDAQ:ADI) was in 49 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 72. There were 45 hedge funds in our database with ADI holdings at the end of March. Our calculations also showed that ADI isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

According to most investors, hedge funds are assumed to be worthless, outdated investment tools of the past. While there are greater than 8000 funds trading at the moment, We hone in on the top tier of this group, around 850 funds. Most estimates calculate that this group of people oversee the majority of the hedge fund industry’s total asset base, and by shadowing their first-class stock picks, Insider Monkey has formulated a few investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Richard Driehaus of Driehaus Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America 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 let’s check out the recent hedge fund action regarding Analog Devices, Inc. (NASDAQ:ADI).

What does smart money think about Analog Devices, Inc. (NASDAQ:ADI)?

At the end of the second quarter, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in ADI over the last 20 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Is ADI A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, William von Mueffling’s Cantillon Capital Management has the largest position in Analog Devices, Inc. (NASDAQ:ADI), worth close to $612.1 million, comprising 5.3% of its total 13F portfolio. On Cantillon Capital Management’s heels is Robert Rodriguez and Steven Romick of First Pacific Advisors LLC, with a $376.5 million position; the fund has 5.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions encompass David Blood and Al Gore’s Generation Investment Management, Panayotis Takis Sparaggis’s Alkeon Capital Management and Andreas Halvorsen’s Viking Global. In terms of the portfolio weights assigned to each position Cavalry Asset Management allocated the biggest weight to Analog Devices, Inc. (NASDAQ:ADI), around 10.62% of its 13F portfolio. Totem Point Management is also relatively very bullish on the stock, designating 7.7 percent of its 13F equity portfolio to ADI.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Viking Global, managed by Andreas Halvorsen, assembled the biggest position in Analog Devices, Inc. (NASDAQ:ADI). Viking Global had $240.4 million invested in the company at the end of the quarter. Steve Cohen’s Point72 Asset Management also made a $76.7 million investment in the stock during the quarter. The following funds were also among the new ADI investors: Richard Driehaus’s Driehaus Capital, Dmitry Balyasny’s Balyasny Asset Management, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Analog Devices, Inc. (NASDAQ:ADI) but similarly valued. We will take a look at Westpac Banking Corporation (NYSE:WBK), ConocoPhillips (NYSE:COP), Norfolk Southern Corp. (NYSE:NSC), Waste Management, Inc. (NYSE:WM), PNC Financial Services Group Inc. (NYSE:PNC), Aon plc (NYSE:AON), and Atlassian Corporation Plc (NASDAQ:TEAM). This group of stocks’ market valuations match ADI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WBK 4 28400 -5
COP 44 912521 -10
NSC 47 867199 -4
WM 39 2844869 -1
PNC 52 1108094 12
AON 57 4755205 10
TEAM 55 2872691 -4
Average 42.6 1912711 -0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.6 hedge funds with bullish positions and the average amount invested in these stocks was $1913 million. That figure was $2849 million in ADI’s case. Aon plc (NYSE:AON) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 4 bullish hedge fund positions. Analog Devices, Inc. (NASDAQ:ADI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADI is 71.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 33% in 2020 through the end of August and beat the market by 23.2 percentage points. Unfortunately ADI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ADI were disappointed as the stock returned -4.2% 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.