Hedge Funds Are Coming Back To II-VI, Inc. (IIVI)

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 II-VI, Inc. (NASDAQ:IIVI) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

II-VI, Inc. (NASDAQ:IIVI) investors should be aware of an increase in activity from the world’s largest hedge funds recently. II-VI, Inc. (NASDAQ:IIVI) was in 28 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 32. Our calculations also showed that IIVI 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Steven Cohen of Point72 Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s take a peek at the key hedge fund action regarding II-VI, Inc. (NASDAQ:IIVI).

How are hedge funds trading II-VI, Inc. (NASDAQ:IIVI)?

At Q2’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 40% from the previous quarter. By comparison, 21 hedge funds held shares or bullish call options in IIVI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Millennium Management, managed by Israel Englander, holds the most valuable position in II-VI, Inc. (NASDAQ:IIVI). Millennium Management has a $32.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Millennium Management’s heels is Maplelane Capital, managed by Leon Shaulov, which holds a $21.7 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism contain Steven Baughman’s Divisar Capital, and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to II-VI, Inc. (NASDAQ:IIVI), around 5.86% of its 13F portfolio. Boardman Bay Capital Management is also relatively very bullish on the stock, earmarking 4.89 percent of its 13F equity portfolio to IIVI.

Now, some big names have jumped into II-VI, Inc. (NASDAQ:IIVI) headfirst. Millennium Management, managed by Israel Englander, created the most valuable position in II-VI, Inc. (NASDAQ:IIVI). Millennium Management had $32.2 million invested in the company at the end of the quarter. Leon Shaulov’s Maplelane Capital also made a $21.7 million investment in the stock during the quarter. The other funds with brand new IIVI positions are Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Robert Joseph Caruso’s Select Equity Group, and Steve Cohen’s Point72 Asset Management.

Let’s also examine hedge fund activity in other stocks similar to II-VI, Inc. (NASDAQ:IIVI). We will take a look at CAE, Inc. (NYSE:CAE), Noble Energy, Inc. (NASDAQ:NBL), Switch, Inc. (NYSE:SWCH), Grand Canyon Education Inc (NASDAQ:LOPE), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), Tetra Tech, Inc. (NASDAQ:TTEK), and Lancaster Colony Corporation (NASDAQ:LANC). All of these stocks’ market caps are similar to IIVI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAE 14 106251 -6
NBL 38 364034 3
SWCH 22 410263 -2
LOPE 35 206855 7
BHVN 42 915722 13
TTEK 19 90700 -2
LANC 19 246200 -4
Average 27 334289 1.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $334 million. That figure was $176 million in IIVI’s case. Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN) is the most popular stock in this table. On the other hand CAE, Inc. (NYSE:CAE) is the least popular one with only 14 bullish hedge fund positions. II-VI, Inc. (NASDAQ:IIVI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IIVI is 61.3. 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 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately IIVI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on IIVI were disappointed as the stock returned -15.2% 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.