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Hedge Funds Started Dumping Microchip Technology Incorporated (MCHP) At The Wrong Time

A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 28, so let’s proceed with the discussion of the hedge fund sentiment on Microchip Technology Incorporated (NASDAQ:MCHP).

Microchip Technology Incorporated (NASDAQ:MCHP) investors should pay attention to a decrease in hedge fund sentiment of late. MCHP was in 26 hedge funds’ portfolios at the end of June. There were 32 hedge funds in our database with MCHP positions at the end of the previous quarter. Our calculations also showed that MCHP isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are plenty of indicators stock traders can use to appraise stocks. A couple of the less utilized indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the elite investment managers can beat the S&P 500 by a superb margin (see the details here).

MCHP_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, 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 look at the key hedge fund action surrounding Microchip Technology Incorporated (NASDAQ:MCHP).

How have hedgies been trading Microchip Technology Incorporated (NASDAQ:MCHP)?

At the end of the second quarter, a total of 26 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -19% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in MCHP over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Kerr Neilson

The largest stake in Microchip Technology Incorporated (NASDAQ:MCHP) was held by Platinum Asset Management, which reported holding $178.8 million worth of stock at the end of March. It was followed by Partner Fund Management with a $65.3 million position. Other investors bullish on the company included Citadel Investment Group, Point72 Asset Management, and Generation Investment Management.

Since Microchip Technology Incorporated (NASDAQ:MCHP) has witnessed declining sentiment from the smart money, logic holds that there is a sect of hedgies who sold off their full holdings in the second quarter. Intriguingly, Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors dropped the largest investment of the 750 funds followed by Insider Monkey, valued at close to $48.8 million in call options. Steve Cohen’s fund, Point72 Asset Management, also cut its call options, about $33.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest dropped by 6 funds in the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Microchip Technology Incorporated (NASDAQ:MCHP) but similarly valued. We will take a look at Centene Corp (NYSE:CNC), Mettler-Toledo International Inc. (NYSE:MTD), Imperial Oil Limited (NYSE:IMO), and McCormick & Company, Incorporated (NYSE:MKC). This group of stocks’ market caps are similar to MCHP’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNC 65 2992011 7
MTD 20 318889 2
IMO 12 48343 -5
MKC 30 214802 6
Average 31.75 893511 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $894 million. That figure was $500 million in MCHP’s case. Centene Corp (NYSE:CNC) is the most popular stock in this table. On the other hand Imperial Oil Limited (NYSE:IMO) is the least popular one with only 12 bullish hedge fund positions. Microchip Technology Incorporated (NASDAQ:MCHP) is not the least popular stock in this group but hedge fund interest is still below 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. A small number of hedge funds were also right about betting on MCHP as the stock returned 7.6% during the same time frame and outperformed the market by an even larger margin.

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

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