It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 20% in the first 9 months of this year (through September 30th). Conversely, hedge funds’ top 20 large-cap stock picks generated a return of 24% during the same 9-month period, with the majority of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ consensus stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like M/A-COM Technology Solutions Holdings (NASDAQ:MTSI).
M/A-COM Technology Solutions Holdings (NASDAQ:MTSI) has seen an increase in hedge fund sentiment recently. Our calculations also showed that MTSI isn’t among the 30 most popular stocks among hedge funds (see the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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’ 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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a glance at the key hedge fund action surrounding M/A-COM Technology Solutions Holdings (NASDAQ:MTSI).
Hedge fund activity in M/A-COM Technology Solutions Holdings (NASDAQ:MTSI)
Heading into the third quarter of 2019, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MTSI over the last 16 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Yiheng Capital, managed by Jonathan Guo, holds the biggest position in M/A-COM Technology Solutions Holdings (NASDAQ:MTSI). Yiheng Capital has a $48.2 million position in the stock, comprising 5.7% of its 13F portfolio. The second most bullish fund manager is D E Shaw, led by D. E. Shaw, holding a $40.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish encompass Ken Griffin’s Citadel Investment Group, Joe Milano’s Greenhouse Funds and Chuck Royce’s Royce & Associates.
With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, established the largest position in M/A-COM Technology Solutions Holdings (NASDAQ:MTSI). Alyeska Investment Group had $4.8 million invested in the company at the end of the quarter. Leon Shaulov’s Maplelane Capital also made a $4.5 million investment in the stock during the quarter. The following funds were also among the new MTSI investors: Marc Majzner’s Clearline Capital, Frank Slattery’s Symmetry Peak Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as M/A-COM Technology Solutions Holdings (NASDAQ:MTSI) but similarly valued. We will take a look at ANI Pharmaceuticals Inc (NASDAQ:ANIP), The Marcus Corporation (NYSE:MCS), Dicerna Pharmaceuticals Inc (NASDAQ:DRNA), and Voyager Therapeutics, Inc. (NASDAQ:VYGR). All of these stocks’ market caps match MTSI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ANIP | 12 | 98908 | -5 |
| MCS | 14 | 63696 | -2 |
| DRNA | 16 | 289627 | -3 |
| VYGR | 18 | 194812 | 0 |
| Average | 15 | 161761 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $162 million. That figure was $176 million in MTSI’s case. Voyager Therapeutics, Inc. (NASDAQ:VYGR) is the most popular stock in this table. On the other hand ANI Pharmaceuticals Inc (NASDAQ:ANIP) is the least popular one with only 12 bullish hedge fund positions. M/A-COM Technology Solutions Holdings (NASDAQ:MTSI) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on MTSI as the stock returned 42.1% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.
