How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Maxim Integrated Products Inc. (NASDAQ:MXIM) and determine whether hedge funds had an edge regarding this stock.
Maxim Integrated Products Inc. (NASDAQ:MXIM) has experienced an increase in hedge fund sentiment lately. Maxim Integrated Products Inc. (NASDAQ:MXIM) was in 33 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 37. There were 30 hedge funds in our database with MXIM holdings at the end of March. Our calculations also showed that MXIM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. Cannabis stocks are roaring back in 2020, which is why we are also checking out this under-the-radar stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now let’s take a peek at the new hedge fund action surrounding Maxim Integrated Products Inc. (NASDAQ:MXIM).
How have hedgies been trading Maxim Integrated Products Inc. (NASDAQ:MXIM)?
At Q2’s end, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the previous quarter. On the other hand, there were a total of 28 hedge funds with a bullish position in MXIM a year ago. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, AQR Capital Management held the most valuable stake in Maxim Integrated Products Inc. (NASDAQ:MXIM), which was worth $68.3 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $40.7 million worth of shares. Two Sigma Advisors, Balyasny Asset Management, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Prospector Partners allocated the biggest weight to Maxim Integrated Products Inc. (NASDAQ:MXIM), around 2.06% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, earmarking 1.65 percent of its 13F equity portfolio to MXIM.
As industrywide interest jumped, specific money managers have been driving this bullishness. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the most valuable position in Maxim Integrated Products Inc. (NASDAQ:MXIM). Balyasny Asset Management had $28.9 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $22.5 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Mikal Patel’s Oribel Capital Management, and Greg Eisner’s Engineers Gate Manager.
Let’s go over hedge fund activity in other stocks similar to Maxim Integrated Products Inc. (NASDAQ:MXIM). We will take a look at Laboratory Corp. of America Holdings (NYSE:LH), Amcor plc (NYSE:AMCR), Pioneer Natural Resources Company (NYSE:PXD), Bilibili Inc. (NASDAQ:BILI), Hess Corporation (NYSE:HES), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), and Arista Networks Inc (NYSE:ANET). This group of stocks’ market valuations resemble MXIM’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 36.3 hedge funds with bullish positions and the average amount invested in these stocks was $822 million. That figure was $324 million in MXIM’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Amcor plc (NYSE:AMCR) is the least popular one with only 16 bullish hedge fund positions. Maxim Integrated Products Inc. (NASDAQ:MXIM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MXIM is 53.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and beat the market by 23.2 percentage points. A small number of hedge funds were also right about betting on MXIM, though not to the same extent, as the stock returned 13.7% during the first two months of Q3 and outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.