Hedge Funds Are Crazy About Cognex Corporation (CGNX)

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Cognex Corporation (NASDAQ:CGNX).

Is Cognex Corporation (NASDAQ:CGNX) a marvelous investment now? Money managers were turning bullish. The number of long hedge fund positions moved up by 1 in recent months. Cognex Corporation (NASDAQ:CGNX) was in 35 hedge funds’ portfolios at the end of June. The all time high for this statistic is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that CGNX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s take a look at the recent hedge fund action regarding Cognex Corporation (NASDAQ:CGNX).

Do Hedge Funds Think CGNX Is A Good Stock To Buy Now?

At second quarter’s end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from the previous quarter. By comparison, 26 hedge funds held shares or bullish call options in CGNX a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes significantly (or already accumulated large positions).

Is CGNX A Good Stock To Buy?

Among these funds, Fundsmith LLP held the most valuable stake in Cognex Corporation (NASDAQ:CGNX), which was worth $136.2 million at the end of the second quarter. On the second spot was D E Shaw which amassed $56.1 million worth of shares. Royce & Associates, Montanaro Asset Management, and Balyasny Asset Management 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 Montanaro Asset Management allocated the biggest weight to Cognex Corporation (NASDAQ:CGNX), around 4.45% of its 13F portfolio. Sandler Capital Management is also relatively very bullish on the stock, designating 1.47 percent of its 13F equity portfolio to CGNX.

Now, some big names have been driving this bullishness. Motley Fool Asset Management, managed by Bryan Hinmon, initiated the largest position in Cognex Corporation (NASDAQ:CGNX). Motley Fool Asset Management had $6.3 million invested in the company at the end of the quarter. Ray Dalio’s Bridgewater Associates also initiated a $4.9 million position during the quarter. The following funds were also among the new CGNX investors: Paul Marshall and Ian Wace’s Marshall Wace LLP, Karim Abbadi and Edward McBride’s Centiva Capital, and Gavin Saitowitz and Cisco J. del Valle’s Prelude Capital (previously Springbok Capital).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Cognex Corporation (NASDAQ:CGNX) but similarly valued. These stocks are Howmet Aerospace Inc. (NYSE:HWM), Molina Healthcare, Inc. (NYSE:MOH), Agnico Eagle Mines Limited (NYSE:AEM), GDS Holdings Limited (NASDAQ:GDS), Godaddy Inc (NYSE:GDDY), Citrix Systems, Inc. (NASDAQ:CTXS), and UDR, Inc. (NYSE:UDR). This group of stocks’ market caps match CGNX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
HWM 47 3892856 -4
MOH 34 1618744 3
AEM 29 235678 1
GDS 38 1648522 -2
GDDY 39 2769173 0
CTXS 23 668537 3
UDR 24 251040 -6
Average 33.4 1583507 -0.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $1584 million. That figure was $537 million in CGNX’s case. Howmet Aerospace Inc. (NYSE:HWM) is the most popular stock in this table. On the other hand Citrix Systems, Inc. (NASDAQ:CTXS) is the least popular one with only 23 bullish hedge fund positions. Cognex Corporation (NASDAQ:CGNX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CGNX is 61. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 21.8% in 2021 through October 11th and beat the market again by 4.4 percentage points. Unfortunately CGNX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CGNX were disappointed as the stock returned -5.4% since the end of June (through 10/11) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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