Here is What Hedge Funds Think About Analog Devices, Inc. (ADI)

The third-quarter stock market correction has turned out to resemble the situation observed during the Asian financial crisis of 1997. The two relatively short-lived corrections occurred at a time with stable interest rates, falling commodity markets, with strong-performing technology and healthcare sectors, and struggling energy sector. Similarly, the two corrections followed long periods without a correction, which had to come sooner or later and it did. Even so, several prominent hedge fund investors publicly asserted their bearish view on the current state of the U.S. equity markets, suggesting that they significantly cut their exposure to equities during the latest quarter. Having said that, it would be worthwhile to take a look at the hedge fund sentiment on Analog Devices, Inc. (NASDAQ:ADI) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Is Analog Devices, Inc. (NASDAQ:ADI) going to take off soon? The smart money is taking an optimistic view. The number of long hedge fund bets went up by 5 recently. ADI was in 32 hedge funds’ portfolios at the end of September. There were 27 hedge funds in our database with ADI holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Spectra Energy Corp. (NYSE:SE), Tyson Foods, Inc. (NYSE:TSN), and Telekomunikasi Indns Tbk Prshn PP PT-ADR (NYSE:TLK) to gather more data points.

To most shareholders, hedge funds are assumed to be slow, old investment vehicles of years past. While there are greater than 8000 funds with their doors open today, Our researchers look at the bigwigs of this club, about 700 funds. These hedge fund managers handle bulk of the smart money’s total asset base, and by following their top picks, Insider Monkey has discovered several investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points annually for a decade in their back tests.

With all of this in mind, we’re going to take a peek at the latest action surrounding Analog Devices, Inc. (NASDAQ:ADI).

What does the smart money think about Analog Devices, Inc. (NASDAQ:ADI)?

At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Cantillon Capital Management, managed by William von Mueffling, holds the largest position in Analog Devices, Inc. (NASDAQ:ADI). Cantillon Capital Management has a $423.1 million position in the stock, comprising 9% of its 13F portfolio. On Cantillon Capital Management’s heels is First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, which holds a $230.4 million position; the fund has 2% of its 13F portfolio invested in the stock. Remaining members of the smart money that are bullish consist of Alex Sacerdote’s Whale Rock Capital Management, Panayotis Takis Sparaggis’s Alkeon Capital Management and D E Shaw.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Winton Capital Management, managed by David Harding, created the biggest position in Analog Devices, Inc. (NASDAQ:ADI). Winton Capital Management had $17.9 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $16.5 million position during the quarter. The following funds were also among the new ADI investors: Daniel Benton’s Andor Capital Management, Ray Dalio’s Bridgewater Associates, and Andrew Sandler’s Sandler Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Analog Devices, Inc. (NASDAQ:ADI) but similarly valued. These stocks are Spectra Energy Corp. (NYSE:SE), Tyson Foods, Inc. (NYSE:TSN), Telekomunikasi Indns Tbk Prshn PP PT-ADR (NYSE:TLK), and ConAgra Foods, Inc. (NYSE:CAG). This group of stocks’ market valuations resemble ADI’s market valuation.

As you can see these stocks had an average of 29.25 hedge funds with bullish positions and the average amount invested in these stocks was $1124 million. That figure was $1190 million in ADI’s case. Tyson Foods, Inc. (NYSE:TSN) is the most popular stock in this table. On the other hand Telekomunikasi Indns Tbk Prshn PP PT-ADR (NYSE:TLK) is the least popular one with only 9 bullish hedge fund positions. Analog Devices, Inc. (NASDAQ:ADI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard TSN might be a better candidate to consider a long position.