Hedge Funds Are Warming Up To Tower Semiconductor Ltd. (TSEM)

We at Insider Monkey have gone over 866 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article, we look at what those funds think of Tower Semiconductor Ltd. (NASDAQ:TSEM) based on that data.

Tower Semiconductor Ltd. (NASDAQ:TSEM) has experienced an increase in activity from the world’s largest hedge funds in recent months. Tower Semiconductor Ltd. (NASDAQ:TSEM) was in 19 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 26. Our calculations also showed that TSEM isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

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 115 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.

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Keeping this in mind let’s go over the new hedge fund action encompassing Tower Semiconductor Ltd. (NASDAQ:TSEM).

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

At the end of March, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 12% from the fourth quarter of 2020. On the other hand, there were a total of 11 hedge funds with a bullish position in TSEM 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.

Is TSEM A Good Stock To Buy?

More specifically, Rima Senvest Management was the largest shareholder of Tower Semiconductor Ltd. (NASDAQ:TSEM), with a stake worth $213.2 million reported as of the end of March. Trailing Rima Senvest Management was Parsifal Capital Management, which amassed a stake valued at $61.4 million. D E Shaw, Renaissance Technologies, and Royce & Associates 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 Rima Senvest Management allocated the biggest weight to Tower Semiconductor Ltd. (NASDAQ:TSEM), around 6.71% of its 13F portfolio. Parsifal Capital Management is also relatively very bullish on the stock, setting aside 5.44 percent of its 13F equity portfolio to TSEM.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Royce & Associates, managed by Chuck Royce, established the biggest position in Tower Semiconductor Ltd. (NASDAQ:TSEM). Royce & Associates had $13.4 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $0.6 million position during the quarter. The following funds were also among the new TSEM investors: Noam Gottesman’s GLG Partners, Qing Li’s Sciencast Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Tower Semiconductor Ltd. (NASDAQ:TSEM) but similarly valued. We will take a look at Trupanion Inc (NYSE:TRUP), CVB Financial Corp. (NASDAQ:CVBF), Focus Financial Partners Inc. (NASDAQ:FOCS), Verint Systems Inc. (NASDAQ:VRNT), AtriCure Inc. (NASDAQ:ATRC), Gibraltar Industries Inc (NASDAQ:ROCK), and Liberty Latin America Ltd. (NASDAQ:LILAK). This group of stocks’ market values are closest to TSEM’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRUP 17 209492 -1
CVBF 13 40237 2
FOCS 23 108921 14
VRNT 26 526980 6
ATRC 14 196084 -7
ROCK 20 114842 2
LILAK 29 512100 -1
Average 20.3 244094 2.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.3 hedge funds with bullish positions and the average amount invested in these stocks was $244 million. That figure was $390 million in TSEM’s case. Liberty Latin America Ltd. (NASDAQ:LILAK) is the most popular stock in this table. On the other hand CVB Financial Corp. (NASDAQ:CVBF) is the least popular one with only 13 bullish hedge fund positions. Tower Semiconductor Ltd. (NASDAQ:TSEM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for TSEM is 47.7. 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 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 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately TSEM wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); TSEM investors were disappointed as the stock returned -7% since the end of March (through 7/16) 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.