Hedge Funds Are Pouring Into Microsemi Corporation (MSCC): Should You Follow?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Microsemi Corporation (NASDAQ:MSCC) from the perspective of those elite funds.

Microsemi Corporation (NASDAQ:MSCC) was in 25 hedge funds’ portfolios at the end of the third quarter of 2016. MSCC has experienced an increase in hedge fund interest recently. There were 19 hedge funds in our database with MSCC 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 BBVA Banco Frances S.A. (ADR) (NYSE:BFR), CONSOL Energy Inc. (NYSE:CNX), and Vermilion Energy Inc (NYSE:VET) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What does the smart money think about Microsemi Corporation (NASDAQ:MSCC)?

Heading into the fourth quarter of 2016, a total of 25 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 32% surge from the previous quarter, pushing its gains for the last 2 quarters to 67%. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Columbus Circle Investors, managed by Principal Global Investors, holds the biggest position in Microsemi Corporation (NASDAQ:MSCC). Columbus Circle Investors has a $42.5 million position in the stock. Coming in second is Royce & Associates, led by Chuck Royce, holding a $23.3 million position. Remaining peers that hold long positions comprise Andrew Sandler’s Sandler Capital Management and Jim Simons’ Renaissance Technologies.

As industry-wide interest jumped, key hedge funds were leading the bulls’ herd. Sandler Capital Management, managed by Andrew Sandler, established the biggest call position in Microsemi Corporation (NASDAQ:MSCC). Sandler Capital Management had $14.7 million invested in the company at the end of the quarter. Jim Simons’ Renaissance Technologies also initiated a $12.5 million position during the quarter. The other funds with brand new MSCC positions are John Burbank’s Passport Capital, Israel Englander’s Millennium Management, and Ira Unschuld’s Brant Point Investment Management.

Let’s go over hedge fund activity in other stocks similar to Microsemi Corporation (NASDAQ:MSCC). We will take a look at BBVA Banco Frances S.A. (ADR) (NYSE:BFR), CONSOL Energy Inc. (NYSE:CNX), Vermilion Energy Inc (NYSE:VET), and ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD). This group of stocks’ market values match MSCC’s market value.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $720 million. That figure was $190 million in MSCC’s case. CONSOL Energy Inc. (NYSE:CNX) is the most popular stock in this table. On the other hand Vermilion Energy Inc (NYSE:VET) is the least popular one with only 8 bullish hedge fund positions. Microsemi Corporation (NASDAQ:MSCC) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CNX might be a better candidate to consider a long position in, though MSCC is one to watch.

Disclosure: None