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Here is What Hedge Funds Think About Cognex Corporation (CGNX)

Hedge funds are not perfect. They have their bad picks just like everyone else. Micron, a stock hedge funds have loved, lost 50% during the last 12 months ending in October 30. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% in the same time period, vs. a gain of 5.2% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Cognex Corporation (NASDAQ:CGNX).

Cognex Corporation (NASDAQ:CGNX)’s stock is 16% in the red year-to-date, which, in turn, has led to prominent investors heading for the exits. Among the funds we follow, the number of bullish hedge fund bets retreated by an 8 in recent months. 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 United States Cellular Corporation (NYSE:USM), Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS), and Charles River Laboratories (NYSE:CRL) to gather more data points.

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In the eyes of most traders, hedge funds are viewed as underperforming, old financial vehicles of years past. While there are more than an 8000 funds trading at present, Our experts look at the leaders of this group, about 700 funds. Most estimates calculate that this group of people orchestrate bulk of all hedge funds’ total capital, and by keeping track of their highest performing investments, Insider Monkey has unearthed numerous investment strategies that have historically surpassed the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, we’re going to take a look at the latest action surrounding Cognex Corporation (NASDAQ:CGNX).

How are hedge funds trading Cognex Corporation (NASDAQ:CGNX)?

Heading into Q4, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 36% over the quarter. Among these funds, Royce & Associates, managed by Chuck Royce, holds the largest position in Cognex Corporation (NASDAQ:CGNX). Royce & Associates has a $91.5 million position in the stock, comprising 0.5% of its 13F portfolio. Sitting at the No. 2 spot is Robert Karr’s Joho Capital, with a $12.1 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish contain Brian Ashford-Russell and Tim Woolley’s Polar Capital, Jim Simons’ Renaissance Technologies, and Israel Englander’s Millennium Management.

Judging by the fact that Cognex Corporation (NASDAQ:CGNX) has witnessed declining sentiment from the smart money, it’s easy to see that there exists a select few funds that decided to sell off their full holdings last quarter. At the top of the heap, Clifford Fox’s Columbus Circle Investors cut the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at an estimated $50.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, valued at around $7.3 million. These moves are intriguing to say the least, as total hedge fund interest fell by 8 funds last quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cognex Corporation (NASDAQ:CGNX) but similarly valued. We will take a look at United States Cellular Corporation (NYSE:USM), Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS), Charles River Laboratories (NYSE:CRL), and Leidos Holdings Inc (NYSE:LDOS). This group of stocks’ market values are similar to CGNX’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
USM 12 147318 -3
VLRS 12 58989 3
CRL 27 397360 -3
LDOS 24 116818 1

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $128 million in CGNX’s case. Charles River Laboratories (NYSE:CRL) is the most popular stock in this table. On the other hand United States Cellular Corporation (NYSE:USM) and Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS) are the least popular ones with only 12 bullish hedge fund positions. Cognex Corporation (NASDAQ:CGNX) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CRL might be a better candidate to consider a long position.

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