Hedge Funds Are Selling Monolithic Power Systems, Inc. (MPWR)

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Monolithic Power Systems, Inc. (NASDAQ:MPWR).

Monolithic Power Systems, Inc. (NASDAQ:MPWR) has experienced a decrease in enthusiasm from smart money lately. Monolithic Power Systems, Inc. (NASDAQ:MPWR) was in 28 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 37. There were 34 hedge funds in our database with MPWR positions at the end of the second quarter. Our calculations also showed that MPWR isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 we’re going to take a glance at the fresh hedge fund action encompassing Monolithic Power Systems, Inc. (NASDAQ:MPWR).

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

At third quarter’s end, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MPWR over the last 25 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

The largest stake in Monolithic Power Systems, Inc. (NASDAQ:MPWR) was held by GQG Partners, which reported holding $247.4 million worth of stock at the end of September. It was followed by Impax Asset Management with a $227.8 million position. Other investors bullish on the company included Polar Capital, AQR Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Cavalry Asset Management allocated the biggest weight to Monolithic Power Systems, Inc. (NASDAQ:MPWR), around 3.52% of its 13F portfolio. Osterweis Capital Management is also relatively very bullish on the stock, dishing out 1.35 percent of its 13F equity portfolio to MPWR.

Since Monolithic Power Systems, Inc. (NASDAQ:MPWR) has experienced a decline in interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of funds that decided to sell off their positions entirely heading into Q4. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital said goodbye to the biggest stake of the “upper crust” of funds monitored by Insider Monkey, comprising about $19.2 million in stock. Michael Rockefeller and KarláKroeker’s fund, Woodline Partners, also dropped its stock, about $13.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 6 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Monolithic Power Systems, Inc. (NASDAQ:MPWR). These stocks are Xylem Inc (NYSE:XYL), Hormel Foods Corporation (NYSE:HRL), Imperial Oil Limited (NYSE:IMO), Bio-Rad Laboratories, Inc. (NYSE:BIO), Qualtrics International Inc. (NASDAQ:XM), Warner Music Group Corp. (NASDAQ:WMG), and Waters Corporation (NYSE:WAT). This group of stocks’ market valuations match MPWR’s market valuation.

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As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $1169 million. That figure was $799 million in MPWR’s case. Waters Corporation (NYSE:WAT) is the most popular stock in this table. On the other hand Imperial Oil Limited (NYSE:IMO) is the least popular one with only 10 bullish hedge fund positions. Monolithic Power Systems, Inc. (NASDAQ:MPWR) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MPWR is 51.7. 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 31.1% in 2021 through December 9th and beat the market again by 5.1 percentage points. Unfortunately MPWR wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on MPWR were disappointed as the stock returned 6.4% since the end of September (through 12/9) 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.