Hedge Funds Are Souring On MACOM Technology Solutions Holdings Inc (MTSI)

In this article we will take a look at whether hedge funds think MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) undervalued? Investors who are in the know were in a pessimistic mood. The number of bullish hedge fund positions shrunk by 6 lately. MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) was in 24 hedge funds’ portfolios at the end of June. The all time high for this statistic is 30. Our calculations also showed that MTSI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 30 hedge funds in our database with MTSI holdings at the end of March.

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. With all of this in mind let’s view the latest hedge fund action surrounding MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI).

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

At the end of June, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. On the other hand, there were a total of 23 hedge funds with a bullish position in MTSI a year ago. So, let’s check out 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, D. E. Shaw’s D E Shaw has the most valuable position in MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), worth close to $81.4 million, corresponding to 0.1% of its total 13F portfolio. On D E Shaw’s heels is Ryan Tolkin (CIO) of Schonfeld Strategic Advisors, with a $22.7 million position; 0.2% of its 13F portfolio is allocated to the company. Other hedge funds and institutional investors that hold long positions consist of Renaissance Technologies, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Provenire Capital allocated the biggest weight to MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), around 1.92% of its 13F portfolio. Force Hill Capital Management is also relatively very bullish on the stock, designating 1.44 percent of its 13F equity portfolio to MTSI.

Seeing as MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) has faced declining sentiment from hedge fund managers, it’s easy to see that there is a sect of funds that slashed their entire stakes by the end of the second quarter. Intriguingly, Jerry Kochanski’s Shelter Haven Capital Management cut the biggest position of all the hedgies monitored by Insider Monkey, totaling an estimated $13.1 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $6.7 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 6 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) but similarly valued. These stocks are Sonos, Inc. (NASDAQ:SONO), ACI Worldwide Inc (NASDAQ:ACIW), Alignment Healthcare, Inc. (NASDAQ:ALHC), ICU Medical, Inc. (NASDAQ:ICUI), Tenable Holdings, Inc. (NASDAQ:TENB), Magnite Inc. (NASDAQ:MGNI), and LivePerson, Inc. (NASDAQ:LPSN). This group of stocks’ market caps resemble MTSI’s market cap.

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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 $396 million. That figure was $193 million in MTSI’s case. Sonos, Inc. (NASDAQ:SONO) is the most popular stock in this table. On the other hand Alignment Healthcare, Inc. (NASDAQ:ALHC) is the least popular one with only 4 bullish hedge fund positions. MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MTSI is 46.3. 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on MTSI as the stock returned 3.8% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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