Hedge Funds Are Selling Cognex Corporation (CGNX)

In this article you are going to find out whether hedge funds think Cognex Corporation (NASDAQ:CGNX) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Cognex Corporation (NASDAQ:CGNX) a buy right now? The best stock pickers were cutting their exposure. The number of long hedge fund bets decreased by 1 recently. Cognex Corporation (NASDAQ:CGNX) was in 34 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 35. Our calculations also showed that CGNX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s analyze the latest hedge fund action regarding Cognex Corporation (NASDAQ:CGNX).

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

At Q3’s end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the second quarter of 2021. The graph below displays the number of hedge funds with bullish position in CGNX over the last 25 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

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 $130.4 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $51.9 million worth of shares. D E Shaw, Arrowstreet Capital, and AQR Capital 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 3.59% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, designating 0.43 percent of its 13F equity portfolio to CGNX.

Due to the fact that Cognex Corporation (NASDAQ:CGNX) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of hedgies that slashed their entire stakes heading into Q4. Interestingly, Andrew Sandler’s Sandler Capital Management dumped the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $18.8 million in stock. Robert Joseph Caruso’s fund, Select Equity Group, also dropped its stock, about $11.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 1 funds heading into Q4.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Cognex Corporation (NASDAQ:CGNX) but similarly valued. We will take a look at BioMarin Pharmaceutical Inc. (NASDAQ:BMRN), PTC Inc (NASDAQ:PTC), Cardinal Health, Inc. (NYSE:CAH), Clarivate Plc (NYSE:CLVT), Alliant Energy Corporation (NYSE:LNT), Zendesk Inc (NYSE:ZEN), and News Corp (NASDAQ:NWSA). This group of stocks’ market valuations are closest to CGNX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BMRN 44 1441300 0
PTC 37 1819643 6
CAH 36 664971 -4
CLVT 32 4723546 -9
LNT 17 76693 1
ZEN 53 1557704 1
NWSA 34 737689 -3
Average 36.1 1574507 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 36.1 hedge funds with bullish positions and the average amount invested in these stocks was $1575 million. That figure was $428 million in CGNX’s case. Zendesk Inc (NYSE:ZEN) is the most popular stock in this table. On the other hand Alliant Energy Corporation (NYSE:LNT) is the least popular one with only 17 bullish hedge fund positions. Cognex Corporation (NASDAQ:CGNX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CGNX is 56.8. 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 negative signal and 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 28.6% in 2021 through November 30th and surpassed the market again by 5.6 percentage points. Unfortunately CGNX wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CGNX investors were disappointed as the stock returned -3.6% since the end of September (through 11/30) 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 most of these stocks already outperformed the market in 2021.

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