We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Ackman’s recent Valeant losses). However, it is still good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Fairchild Semiconductor Intl Inc (NYSE:FCS).
Is Fairchild Semiconductor Intl Inc (NYSE:FCS) a bargain? Hedge funds are in a pessimistic mood. The number of bullish hedge fund positions were trimmed by 6 in recent months. 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 SeaWorld Entertainment Inc (NYSE:SEAS), MSG Networks Inc (NYSE:MSGN), and TESARO Inc (NASDAQ:TSRO) to gather more data points.
Hedge fund activity in Fairchild Semiconductor Intl Inc (NYSE:FCS)
At the end of Q3, a total of 14 of the hedge funds tracked by Insider Monkey were bullish in this stock, a change of -30% from the second quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund holdings data compiled by Insider Monkey, Chuck Royce’s mutual fund, Royce & Associates, has the number one position in Fairchild Semiconductor Intl Inc (NYSE:FCS), worth close to $23 million, corresponding to 0.1% of its total 13F portfolio. On Royce & Associates’s heels is Cliff Asness of AQR Capital Management, with a $19.8 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds with similar optimism comprise Frank Brosens’ Taconic Capital, Zac Hirzel’s Hirzel Capital Management and Israel Englander’s Millennium Management.
Since Fairchild Semiconductor Intl Inc (NYSE:FCS) has experienced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers that slashed their full holdings at the end of the third quarter. Intriguingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dumped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, totaling close to $30.5 million in stock, and Joel Greenblatt of Gotham Asset Management was right behind this move, as the fund dumped about $25.5 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 6 funds at the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Fairchild Semiconductor Intl Inc (NYSE:FCS). These stocks are SeaWorld Entertainment Inc (NYSE:SEAS), MSG Networks Inc (NYSE:MSGN), TESARO Inc (NASDAQ:TSRO), and Globalstar, Inc. (PINK:GSAT). This group of stocks’ market valuations are similar to Fairchild Semiconductor Intl Inc (NYSE:FCS)’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $258 million. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand Globalstar, Inc. (PINK:GSAT) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Fairchild Semiconductor Intl Inc (NYSE:FCS) is even less popular than Globalstar, Inc. (PINK:GSAT). Considering that hedge funds aren’t fond of this stock in comparison to its market cap peers, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.