The market has been volatile in the fourth quarter as the Federal Reserve continued its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by nearly 7 percentage points. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Cohu, Inc. (NASDAQ:COHU) and find out how it is affected by hedge funds’ moves.
Is Cohu, Inc. (NASDAQ:COHU) an outstanding stock to buy now? Hedge funds are getting less optimistic. The number of bullish hedge fund bets were trimmed by 6 recently. Our calculations also showed that COHU isn’t among the 30 most popular stocks among hedge funds. COHU was in 9 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 15 hedge funds in our database with COHU positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to view the fresh hedge fund action regarding Cohu, Inc. (NASDAQ:COHU).
What does the smart money think about Cohu, Inc. (NASDAQ:COHU)?
At the end of the fourth quarter, a total of 9 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -40% from one quarter earlier. On the other hand, there were a total of 14 hedge funds with a bullish position in COHU a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Cohu, Inc. (NASDAQ:COHU), which was worth $16 million at the end of the fourth quarter. On the second spot was Renaissance Technologies which amassed $7.7 million worth of shares. Moreover, D E Shaw, Two Sigma Advisors, and Gotham Asset Management were also bullish on Cohu, Inc. (NASDAQ:COHU), allocating a large percentage of their portfolios to this stock.
Since Cohu, Inc. (NASDAQ:COHU) has faced declining sentiment from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers who sold off their entire stakes in the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dropped the largest stake of the 700 funds tracked by Insider Monkey, totaling about $8.4 million in stock. Cliff Asness’s fund, AQR Capital Management, also dumped its stock, about $2.5 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 6 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Cohu, Inc. (NASDAQ:COHU). We will take a look at Rudolph Technologies Inc (NYSE:RTEC), Heska Corp (NASDAQ:HSKA), ORBCOMM Inc (NASDAQ:ORBC), and Great Southern Bancorp, Inc. (NASDAQ:GSBC). This group of stocks’ market valuations match COHU’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 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $59 million. That figure was $34 million in COHU’s case. Rudolph Technologies Inc (NYSE:RTEC) is the most popular stock in this table. On the other hand Great Southern Bancorp, Inc. (NASDAQ:GSBC) is the least popular one with only 8 bullish hedge fund positions. Cohu, Inc. (NASDAQ:COHU) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately COHU wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); COHU investors were disappointed as the stock returned -8.1% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.