After several tireless days we have finished crunching the numbers from nearly 817 13F filings issued by the elite hedge funds and other investment firms that we track at Insider Monkey, which disclosed those firms’ equity portfolios as of September 30th. The results of that effort will be put on display in this article, as we share valuable insight into the smart money sentiment towards Diodes Incorporated (NASDAQ:DIOD).
Is DIOD a good stock to buy now? Diodes Incorporated (NASDAQ:DIOD) has seen a decrease in hedge fund interest in recent months. Diodes Incorporated (NASDAQ:DIOD) was in 13 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 23. There were 14 hedge funds in our database with DIOD positions at the end of the second quarter. Our calculations also showed that DIOD isn’t among the 30 most popular stocks among hedge funds (click for Q3 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.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now we’re going to go over the fresh hedge fund action encompassing Diodes Incorporated (NASDAQ:DIOD).
Do Hedge Funds Think DIOD Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in DIOD over the last 21 quarters. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings considerably (or already accumulated large positions).
The largest stake in Diodes Incorporated (NASDAQ:DIOD) was held by Adage Capital Management, which reported holding $37.6 million worth of stock at the end of September. It was followed by Royce & Associates with a $25.9 million position. Other investors bullish on the company included Woodline Partners, Fisher Asset Management, and Cinctive Capital Management. In terms of the portfolio weights assigned to each position Woodline Partners allocated the biggest weight to Diodes Incorporated (NASDAQ:DIOD), around 0.46% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, earmarking 0.42 percent of its 13F equity portfolio to DIOD.
Due to the fact that Diodes Incorporated (NASDAQ:DIOD) has faced declining sentiment from hedge fund managers, we can see that there were a few funds that slashed their positions entirely heading into Q4. It’s worth mentioning that Roger Ibbotson’s Zebra Capital Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, comprising close to $0.8 million in stock. Benjamin A. Smith’s fund, Laurion Capital Management, also sold off its stock, about $0.7 million worth. These transactions are important to note, as total hedge fund interest dropped by 1 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Diodes Incorporated (NASDAQ:DIOD) but similarly valued. These stocks are Companhia Energetica Minas Gerais (NYSE:CIG), Kohl’s Corporation (NYSE:KSS), John Bean Technologies Corporation (NYSE:JBT), Community Bank System, Inc. (NYSE:CBU), LGI Homes Inc (NASDAQ:LGIH), GW Pharmaceuticals plc (NASDAQ:GWPH), and Crane Co. (NYSE:CR). This group of stocks’ market values resemble DIOD’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 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $161 million. That figure was $109 million in DIOD’s case. Kohl’s Corporation (NYSE:KSS) is the most popular stock in this table. On the other hand Companhia Energetica Minas Gerais (NYSE:CIG) is the least popular one with only 9 bullish hedge fund positions. Diodes Incorporated (NASDAQ:DIOD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DIOD is 27.9. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on DIOD as the stock returned 26.9% since the end of the third quarter (through 12/8) and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.