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Hedge Funds Have Never Been This Bullish On Kulicke and Soffa Industries Inc. (KLIC)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) based on that data and determine whether they were really smart about the stock.

Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) investors should be aware of an increase in enthusiasm from smart money lately. Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) was in 32 hedge funds’ portfolios at the end of June. The all time high for this statistics is 26. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 19 hedge funds in our database with KLIC holdings at the end of March. Our calculations also showed that KLIC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 56 percentage points since March 2017 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

MOORE GLOBAL INVESTMENTS

Louis Bacon Moore of Moore Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to take a glance at the latest hedge fund action surrounding Kulicke and Soffa Industries Inc. (NASDAQ:KLIC).

How have hedgies been trading Kulicke and Soffa Industries Inc. (NASDAQ:KLIC)?

At Q2’s end, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 68% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in KLIC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) was held by Royce & Associates, which reported holding $59.2 million worth of stock at the end of September. It was followed by D E Shaw with a $26 million position. Other investors bullish on the company included Divisar Capital, Millennium Management, and Polar Capital. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), around 4.67% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.65 percent of its 13F equity portfolio to KLIC.

As industrywide interest jumped, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, initiated the most valuable position in Kulicke and Soffa Industries Inc. (NASDAQ:KLIC). Millennium Management had $12.8 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also initiated a $12.2 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Louis Bacon’s Moore Global Investments, and Michael Gelband’s ExodusPoint Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) but similarly valued. These stocks are McGrath RentCorp (NASDAQ:MGRC), Northwest Bancshares, Inc. (NASDAQ:NWBI), HNI Corp (NYSE:HNI), Veracyte Inc (NASDAQ:VCYT), Atkore International Group Inc. (NYSE:ATKR), Allegheny Technologies Incorporated (NYSE:ATI), and Dycom Industries, Inc. (NYSE:DY). All of these stocks’ market caps are closest to KLIC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MGRC 22 77889 2
NWBI 8 28046 -6
HNI 10 39892 -5
VCYT 9 38060 -3
ATKR 14 71597 1
ATI 27 149783 1
DY 16 55893 -1
Average 15.1 65880 -1.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.1 hedge funds with bullish positions and the average amount invested in these stocks was $66 million. That figure was $197 million in KLIC’s case. Allegheny Technologies Incorporated (NYSE:ATI) is the most popular stock in this table. On the other hand Northwest Bancshares, Inc. (NASDAQ:NWBI) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) is more popular among hedge funds. Our overall hedge fund sentiment score for KLIC is 90. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 23.8% in 2020 through September 14th but still managed to beat the market by 17.6 percentage points. Hedge funds were also right about betting on KLIC as the stock returned 12.8% since the end of June and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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