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Hedge Funds Have Never Been More Bullish On II-VI, Inc. (IIVI)

Insider Monkey finished processing more than 738 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2019. In this article we are going to take a look at smart money sentiment towards II-VI, Inc. (NASDAQ:IIVI).

II-VI, Inc. (NASDAQ:IIVI) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 22 hedge funds’ portfolios at the end of March. 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 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 Sogou Inc. (NYSE:SOGO), MGE Energy, Inc. (NASDAQ:MGEE), and Penn National Gaming, Inc (NASDAQ:PENN) to gather more data points.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

YORK CAPITAL MANAGEMENT

Let’s go over the recent hedge fund action encompassing II-VI, Inc. (NASDAQ:IIVI).

What does the smart money think about II-VI, Inc. (NASDAQ:IIVI)?

Heading into the second quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in IIVI over the last 15 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

No of Hedge Funds with IIVI Positions

More specifically, Daruma Asset Management was the largest shareholder of II-VI, Inc. (NASDAQ:IIVI), with a stake worth $31.1 million reported as of the end of March. Trailing Daruma Asset Management was Citadel Investment Group, which amassed a stake valued at $17.7 million. Royce & Associates, York Capital Management, and Divisar Capital were also very fond of the stock, giving the stock large weights in their portfolios.

Since II-VI, Inc. (NASDAQ:IIVI) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedgies that slashed their full holdings heading into Q3. Intriguingly, Glenn Russell Dubin’s Highbridge Capital Management dumped the largest position of the “upper crust” of funds monitored by Insider Monkey, worth about $9.7 million in stock. Steve Cohen’s fund, Point72 Asset Management, also said goodbye to its stock, about $2.7 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks similar to II-VI, Inc. (NASDAQ:IIVI). We will take a look at Sogou Inc. (NYSE:SOGO), MGE Energy, Inc. (NASDAQ:MGEE), Penn National Gaming, Inc (NASDAQ:PENN), and Washington Federal Inc. (NASDAQ:WAFD). This group of stocks’ market caps match IIVI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SOGO 8 6859 2
MGEE 9 34318 -3
PENN 24 263918 6
WAFD 15 57763 3
Average 14 90715 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $116 million in IIVI’s case. Penn National Gaming, Inc (NASDAQ:PENN) is the most popular stock in this table. On the other hand Sogou Inc. (NYSE:SOGO) is the least popular one with only 8 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately IIVI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on IIVI were disappointed as the stock returned -13.5% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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