Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Himax Technologies, Inc. (NASDAQ:HIMX).
Is Himax Technologies (HIMX) a good stock to buy now? HIMX shareholders have witnessed a decrease in hedge fund interest of late. Himax Technologies, Inc. (NASDAQ:HIMX) was in 6 hedge funds’ portfolios at the end of September. The all time high for this statistics is 27. Our calculations also showed that HIMX 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.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. Keeping this in mind we’re going to take a gander at the fresh hedge fund action regarding Himax Technologies, Inc. (NASDAQ:HIMX).
What have hedge funds been doing with Himax Technologies, Inc. (NASDAQ:HIMX)?
At the end of the third quarter, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -33% from the second quarter of 2020. On the other hand, there were a total of 2 hedge funds with a bullish position in HIMX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
Among these funds, Yiheng Capital held the most valuable stake in Himax Technologies, Inc. (NASDAQ:HIMX), which was worth $24 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $10.1 million worth of shares. Millennium Management, Arrowstreet Capital, and Citadel Investment Group 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 Yiheng Capital allocated the biggest weight to Himax Technologies, Inc. (NASDAQ:HIMX), around 1.45% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, earmarking 0.01 percent of its 13F equity portfolio to HIMX.
Due to the fact that Himax Technologies, Inc. (NASDAQ:HIMX) has faced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there was a specific group of money managers that slashed their positions entirely in the third quarter. Intriguingly, D. E. Shaw’s D E Shaw said goodbye to the biggest stake of all the hedgies tracked by Insider Monkey, valued at about $1.1 million in stock. Ken Griffin’s fund, Citadel Investment Group, also said goodbye to its stock, about $0.8 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Himax Technologies, Inc. (NASDAQ:HIMX). We will take a look at Meta Financial Group Inc. (NASDAQ:CASH), Conduent Incorporated (NASDAQ:CNDT), National Western Life Group Inc. (NASDAQ:NWLI), GameStop Corp. (NYSE:GME), AAR Corp. (NYSE:AIR), SunOpta, Inc. (NASDAQ:STKL), and Star Bulk Carriers Corp. (NASDAQ:SBLK). All of these stocks’ market caps are similar to HIMX’s market cap.
|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 13.3 hedge funds with bullish positions and the average amount invested in these stocks was $143 million. That figure was $42 million in HIMX’s case. GameStop Corp. (NYSE:GME) is the most popular stock in this table. On the other hand Star Bulk Carriers Corp. (NASDAQ:SBLK) is the least popular one with only 5 bullish hedge fund positions. Himax Technologies, Inc. (NASDAQ:HIMX) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for HIMX is 10.8. 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 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on HIMX as the stock returned 94.1% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.