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Hedge Funds Have Never Been This Bullish On Super Micro Computer, Inc. (SMCI)

We at Insider Monkey have gone over 821 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, near the height of the coronavirus market crash. In this article, we look at what those funds think of Super Micro Computer, Inc. (NASDAQ:SMCI) based on that data.

Super Micro Computer, Inc. (NASDAQ:SMCI) was in 24 hedge funds’ portfolios at the end of March. SMCI investors should be aware of an increase in hedge fund sentiment in recent months. There were 2 hedge funds in our database with SMCI holdings at the end of the previous quarter. Our calculations also showed that SMCI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

David Brown Hawk Ridge Partners

David Brown of Hawk Ridge Management

We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a peek at the new hedge fund action regarding Super Micro Computer, Inc. (NASDAQ:SMCI).

How have hedgies been trading Super Micro Computer, Inc. (NASDAQ:SMCI)?

At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of 1100% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in SMCI over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Oaktree Capital Management held the most valuable stake in Super Micro Computer, Inc. (NASDAQ:SMCI), which was worth $73.8 million at the end of the third quarter. On the second spot was Empyrean Capital Partners which amassed $71.7 million worth of shares. Madison Avenue Partners, Park West Asset Management, and Hawk Ridge Management 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 Madison Avenue Partners allocated the biggest weight to Super Micro Computer, Inc. (NASDAQ:SMCI), around 22.4% of its 13F portfolio. Nokomis Capital is also relatively very bullish on the stock, designating 9.28 percent of its 13F equity portfolio to SMCI.

As industrywide interest jumped, specific money managers have jumped into Super Micro Computer, Inc. (NASDAQ:SMCI) headfirst. Empyrean Capital Partners, managed by Michael A. Price and Amos Meron, created the most outsized position in Super Micro Computer, Inc. (NASDAQ:SMCI). Empyrean Capital Partners had $71.7 million invested in the company at the end of the quarter. Eli Samaha’s Madison Avenue Partners also made a $45.2 million investment in the stock during the quarter. The other funds with brand new SMCI positions are Peter S. Park’s Park West Asset Management, David Brown’s Hawk Ridge Management, and Nathaniel August’s Mangrove Partners.

Let’s now review hedge fund activity in other stocks similar to Super Micro Computer, Inc. (NASDAQ:SMCI). These stocks are Allegheny Technologies Incorporated (NYSE:ATI), Acadia Realty Trust (NYSE:AKR), S & T Bancorp Inc (NASDAQ:STBA), and Amneal Pharmaceuticals, Inc. (NYSE:AMRX). This group of stocks’ market valuations resemble SMCI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ATI 26 94777 -1
AKR 14 31992 1
STBA 4 3076 -5
AMRX 7 4326 -3
Average 12.75 33543 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 12.75 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $433 million in SMCI’s case. Allegheny Technologies Incorporated (NYSE:ATI) is the most popular stock in this table. On the other hand S & T Bancorp Inc (NASDAQ:STBA) is the least popular one with only 4 bullish hedge fund positions. Super Micro Computer, Inc. (NASDAQ:SMCI) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on SMCI as the stock returned 36.7% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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