In this article we will check out the progression of hedge fund sentiment towards Pixelworks, Inc. (NASDAQ:PXLW) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Pixelworks, Inc. (NASDAQ:PXLW) was in 8 hedge funds’ portfolios at the end of March. PXLW investors should pay attention to an increase in support from the world’s most elite money managers lately. There were 7 hedge funds in our database with PXLW positions at the end of the previous quarter. Our calculations also showed that PXLW isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s check out the new hedge fund action encompassing Pixelworks, Inc. (NASDAQ:PXLW).
How have hedgies been trading Pixelworks, Inc. (NASDAQ:PXLW)?
At the end of the first quarter, a total of 8 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 14% from one quarter earlier. By comparison, 11 hedge funds held shares or bullish call options in PXLW a year ago. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Pixelworks, Inc. (NASDAQ:PXLW), with a stake worth $4.9 million reported as of the end of September. Trailing Renaissance Technologies was Winton Capital Management, which amassed a stake valued at $1.1 million. Millennium Management, D E Shaw, and Two Sigma Advisors 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 HighVista Strategies allocated the biggest weight to Pixelworks, Inc. (NASDAQ:PXLW), around 0.05% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, earmarking 0.03 percent of its 13F equity portfolio to PXLW.
As one would reasonably expect, key money managers have been driving this bullishness. Engineers Gate Manager, managed by Greg Eisner, assembled the most valuable position in Pixelworks, Inc. (NASDAQ:PXLW). Engineers Gate Manager had $0.1 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $0 million investment in the stock during the quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Pixelworks, Inc. (NASDAQ:PXLW) but similarly valued. These stocks are Galectin Therapeutics Inc. (NASDAQ:GALT), Neptune Wellness Solutions Inc (NASDAQ:NEPT), GP Strategies Corporation (NYSE:GPX), and Aptorum Group Limited (NASDAQ:APM). This group of stocks’ market values resemble PXLW’s market value.
|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 5 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $8 million in PXLW’s case. GP Strategies Corporation (NYSE:GPX) is the most popular stock in this table. On the other hand Aptorum Group Limited (NASDAQ:APM) is the least popular one with only 1 bullish hedge fund positions. Pixelworks, Inc. (NASDAQ:PXLW) is not the most popular stock in this group but hedge fund interest is still above average. 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 12.2% in 2020 through June 17th but still beat the market by 14.8 percentage points. Hedge funds were also right about betting on PXLW, though not to the same extent, as the stock returned 21.4% during the first two months and seventeen days of the second quarter and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.