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Hedge Funds Have Never Been This Bullish On Xilinx, Inc. (XLNX)

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

Is Xilinx, Inc. (NASDAQ:XLNX) a superb investment now? Hedge funds are getting more optimistic. The number of long hedge fund bets moved up by 8 lately. Our calculations also showed that XLNX isn’t among the 30 most popular stocks among hedge funds. XLNX was in 56 hedge funds’ portfolios at the end of March. There were 48 hedge funds in our database with XLNX positions at the end of the previous quarter.

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.

Andrew Sandler

Let’s take a gander at the fresh hedge fund action regarding Xilinx, Inc. (NASDAQ:XLNX).

What does the smart money think about Xilinx, Inc. (NASDAQ:XLNX)?

At the end of the first quarter, a total of 56 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from the previous quarter. The graph below displays the number of hedge funds with bullish position in XLNX over the last 15 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

XLNX_june2019

Among these funds, AQR Capital Management held the most valuable stake in Xilinx, Inc. (NASDAQ:XLNX), which was worth $229.1 million at the end of the first quarter. On the second spot was Arrowstreet Capital which amassed $201.5 million worth of shares. Moreover, Alkeon Capital Management, Whale Rock Capital Management, and Millennium Management were also bullish on Xilinx, Inc. (NASDAQ:XLNX), allocating a large percentage of their portfolios to this stock.

As industrywide interest jumped, key money managers were breaking ground themselves. Whale Rock Capital Management, managed by Alex Sacerdote, established the biggest position in Xilinx, Inc. (NASDAQ:XLNX). Whale Rock Capital Management had $161.7 million invested in the company at the end of the quarter. Stanley Druckenmiller’s Duquesne Capital also made a $28.4 million investment in the stock during the quarter. The following funds were also among the new XLNX investors: James Crichton’s Hitchwood Capital Management, Andrew Sandler’s Sandler Capital Management, and Guy Shahar’s DSAM Partners.

Let’s check out hedge fund activity in other stocks similar to Xilinx, Inc. (NASDAQ:XLNX). These stocks are Nokia Corporation (NYSE:NOK), Nutrien Ltd. (NYSE:NTR), NetEase, Inc (NASDAQ:NTES), and Square, Inc. (NYSE:SQ). All of these stocks’ market caps match XLNX’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NOK 26 386822 -1
NTR 25 389776 -7
NTES 30 3366336 3
SQ 50 1399349 15
Average 32.75 1385571 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $1386 million. That figure was $1634 million in XLNX’s case. Square, Inc. (NYSE:SQ) is the most popular stock in this table. On the other hand Nutrien Ltd. (NYSE:NTR) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Xilinx, Inc. (NASDAQ:XLNX) is more popular among hedge funds. 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 XLNX wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on XLNX were disappointed as the stock returned -16.6% 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 in Q2.

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

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