As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Microchip Technology Incorporated (NASDAQ:MCHP).
Is Microchip Technology Incorporated (NASDAQ:MCHP) a buy, sell, or hold? Hedge funds were betting on the stock. The number of long hedge fund positions improved by 8 lately. Microchip Technology Incorporated (NASDAQ:MCHP) was in 50 hedge funds’ portfolios at the end of June. The all time high for this statistic was previously 46. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MCHP isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still 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). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Now we’re going to analyze the recent hedge fund action regarding Microchip Technology Incorporated (NASDAQ:MCHP).
Do Hedge Funds Think MCHP Is A Good Stock To Buy Now?
At Q2’s end, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MCHP over the last 24 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
When looking at the institutional investors followed by Insider Monkey, Kerr Neilson’s Platinum Asset Management has the number one position in Microchip Technology Incorporated (NASDAQ:MCHP), worth close to $279.5 million, accounting for 6.5% of its total 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $175.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that are bullish consist of Zach Schreiber’s Point State Capital, Steve Cohen’s Point72 Asset Management and David Blood and Al Gore’s Generation Investment Management. In terms of the portfolio weights assigned to each position Breakline Capital allocated the biggest weight to Microchip Technology Incorporated (NASDAQ:MCHP), around 8% of its 13F portfolio. Platinum Asset Management is also relatively very bullish on the stock, dishing out 6.47 percent of its 13F equity portfolio to MCHP.
As aggregate interest increased, key money managers have jumped into Microchip Technology Incorporated (NASDAQ:MCHP) headfirst. Bridgewater Associates, managed by Ray Dalio, established the most valuable position in Microchip Technology Incorporated (NASDAQ:MCHP). Bridgewater Associates had $11.3 million invested in the company at the end of the quarter. Jinghua Yan’s TwinBeech Capital also initiated a $8.8 million position during the quarter. The other funds with new positions in the stock are Tor Minesuk’s Mondrian Capital, Jeremy Hosking’s Hosking Partners, and Paul Marshall and Ian Wace’s Marshall Wace LLP.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Microchip Technology Incorporated (NASDAQ:MCHP) but similarly valued. These stocks are Amphenol Corporation (NYSE:APH), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Baxter International Inc. (NYSE:BAX), Prudential Financial Inc (NYSE:PRU), Las Vegas Sands Corp. (NYSE:LVS), PPG Industries, Inc. (NYSE:PPG), and Cintas Corporation (NASDAQ:CTAS). This group of stocks’ market values match MCHP’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 39.6 hedge funds with bullish positions and the average amount invested in these stocks was $2462 million. That figure was $1121 million in MCHP’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Cintas Corporation (NASDAQ:CTAS) is the least popular one with only 21 bullish hedge fund positions. Microchip Technology Incorporated (NASDAQ:MCHP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MCHP is 70.2. 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. 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 22.9% in 2021 through October 1st and still beat the market by 5.6 percentage points. Hedge funds were also right about betting on MCHP, though not to the same extent, as the stock returned 2.3% since Q2 (through October 1st) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.