Here is What Hedge Funds Think About Electro Scientific Industries, Inc. (ESIO)

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Electro Scientific Industries, Inc. (NASDAQ:ESIO) .

Electro Scientific Industries, Inc. (NASDAQ:ESIO) was in 12 hedge funds’ portfolios at the end of the third quarter of 2016. ESIO has seen an increase in hedge fund sentiment recently. There were 11 hedge funds in our database with ESIO 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 Real Industry Inc (NASDAQ:RELY), Bankwell Financial Group Inc (NASDAQ:BWFG), and Commercial Vehicle Group, Inc. (NASDAQ:CVGI) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

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Now, let’s analyze the latest action surrounding Electro Scientific Industries, Inc. (NASDAQ:ESIO).

What does the smart money think about Electro Scientific Industries, Inc. (NASDAQ:ESIO)?

At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from the previous quarter. By comparison, 7 hedge funds held shares or bullish call options in ESIO heading into this year. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies, one of the largest hedge funds in the world, holds the number one position in Electro Scientific Industries, Inc. (NASDAQ:ESIO). Renaissance Technologies has a $7 million position in the stock, comprising less than 0.1% of its 13F portfolio. The second most bullish fund manager is Chuck Royce of Royce & Associates, with a $5.1 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish consist of John W. Rogers’s Ariel Investments,  D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these elite funds are among our list of the 100 best performing elite funds which is based on the performance of their 13F long positions in non-microcap stocks.

As aggregate interest increased, key money managers were leading the bulls’ herd. Algert Coldiron Investors, led by Peter Algert and Kevin Coldiron, assembled the biggest position in Electro Scientific Industries, Inc. (NASDAQ:ESIO). Algert Coldiron Investors had $1.3 million invested in the company at the end of the quarter. Neil Chriss’s Hutchin Hill Capital also initiated a $0.2 million position during the quarter.

Let’s go over hedge fund activity in other stocks similar to Electro Scientific Industries, Inc. (NASDAQ:ESIO). These stocks are Real Industry Inc (NASDAQ:RELY), Bankwell Financial Group Inc (NASDAQ:BWFG), Commercial Vehicle Group, Inc. (NASDAQ:CVGI), and Allied Motion Technologies, Inc. (NASDAQ:AMOT). This group of stocks’ market caps match ESIO’s market cap.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $13 million. That figure was $21 million in ESIO’s case. Commercial Vehicle Group, Inc. (NASDAQ:CVGI) is the most popular stock in this table. On the other hand Bankwell Financial Group Inc (NASDAQ:BWFG) is the least popular one with only 4 bullish hedge fund positions. Electro Scientific Industries, Inc. (NASDAQ:ESIO) 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 CVGI might be a better candidate to consider taking a long position in.