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Hedge Funds Are Selling II-VI, Inc. (IIVI)

We can judge whether II-VI, Inc. (NASDAQ:IIVI) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, research shows that these picks historically outperformed the market when we factor in known risk factors.

II-VI, Inc. (NASDAQ:IIVI) develops precision-use materials and opto-electronic components. The stock is up by 32% since the beginning of the year, following a jump in January, but during the third quarter it registered a decrease in enthusiasm from smart money investors. However, 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 or decline 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 BancFirst Corporation (NASDAQ:BANF), Archrock Partners LP (NASDAQ:APLP), and Otter Tail Corporation (NASDAQ:OTTR) to gather more data points.

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In today’s marketplace there are plenty of metrics shareholders employ to grade publicly traded companies. Some of the less known metrics are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the best investment managers can outclass the broader indices by a healthy margin (see the details here).

Now, we’re going to take a gander at the recent action surrounding II-VI, Inc. (NASDAQ:IIVI).

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

At Q3’s end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Chuck Royce’s Royce & Associates has the biggest position in II-VI, Inc. (NASDAQ:IIVI), worth close to $21.3 million, accounting for 0.1% of its total 13F portfolio. The second most bullish fund is Renaissance Technologies, with a $7.2 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors with similar optimism comprise Joel Greenblatt’s Gotham Asset Management, Israel Englander’s Millennium Management, and D. E. Shaw’s D E Shaw.

Due to the fact that II-VI, Inc. (NASDAQ:IIVI) has experienced a declining sentiment from the smart money, we can see that there is a sect of hedge funds who sold off their positions entirely last quarter. Intriguingly, Ken Grossman and Glen Schneider’s SG Capital Management cut the largest stake of all the hedgies watched by Insider Monkey, comprising about $2 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $0.5 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as II-VI, Inc. (NASDAQ:IIVI) but similarly valued. These stocks are BancFirst Corporation (NASDAQ:BANF), Archrock Partners LP (NASDAQ:APLP), Otter Tail Corporation (NASDAQ:OTTR), and Ultra Petroleum Corp. (NYSE:UPL). All of these stocks’ market caps match IIVI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BANF 5 31421 -1
EXLP 6 27563 1
OTTR 13 22632 6
UPL 18 34318 0

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $63 million in IIVI’s case. Ultra Petroleum Corp. (NYSE:UPL) is the most popular stock in this table. On the other hand BancFirst Corporation (NASDAQ:BANF) is the least popular one with only 5 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. This is a slightly positive signal, but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard UPL might be a better candidate to consider a long position.