The financial regulations require hedge funds and wealthy investors that exceeded the $100 million holdings threshold to file a report that shows their positions at the end of every quarter. Even though it isn’t the intention, these filings to a certain extent level the playing field for ordinary investors. The latest round of 13F filings disclosed the funds’ positions on December 31st. We at Insider Monkey have made an extensive database of more than 887 of those established hedge funds and famous value investors’ filings. In this article, we analyze how these elite funds and prominent investors traded II-VI, Inc. (NASDAQ:IIVI) based on those filings.
Is IIVI stock a buy? II-VI, Inc. (NASDAQ:IIVI) investors should pay attention to an increase in activity from the world’s largest hedge funds lately. II-VI, Inc. (NASDAQ:IIVI) was in 26 hedge funds’ portfolios at the end of December. The all time high for this statistic is 32. There were 24 hedge funds in our database with IIVI positions at the end of the third quarter. Our calculations also showed that IIVI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 percentage points since March 2017 (see the details here).
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 review the latest hedge fund action surrounding II-VI, Inc. (NASDAQ:IIVI).
Do Hedge Funds Think IIVI Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the third quarter of 2020. By comparison, 18 hedge funds held shares or bullish call options in IIVI a year ago. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes considerably (or already accumulated large positions).
More specifically, Select Equity Group was the largest shareholder of II-VI, Inc. (NASDAQ:IIVI), with a stake worth $22.4 million reported as of the end of December. Trailing Select Equity Group was Royce & Associates, which amassed a stake valued at $18.2 million. Divisar Capital, Marshall Wace LLP, and Adage Capital Management 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 Divisar Capital allocated the biggest weight to II-VI, Inc. (NASDAQ:IIVI), around 3.81% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, earmarking 3.65 percent of its 13F equity portfolio to IIVI.
Consequently, key money managers were leading the bulls’ herd. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the biggest position in II-VI, Inc. (NASDAQ:IIVI). Marshall Wace LLP had $8.7 million invested in the company at the end of the quarter. Joe DiMenna’s ZWEIG DIMENNA PARTNERS also made a $5.1 million investment in the stock during the quarter. The following funds were also among the new IIVI investors: Dmitry Balyasny’s Balyasny Asset Management, Lee Ainslie’s Maverick Capital, and Jonathan Dawson’s Southport Management.
Let’s check out hedge fund activity in other stocks similar to II-VI, Inc. (NASDAQ:IIVI). We will take a look at Reinsurance Group of America Inc (NYSE:RGA), Proofpoint Inc (NASDAQ:PFPT), CAE, Inc. (NYSE:CAE), Beyond Meat, Inc. (NASDAQ:BYND), Genpact Limited (NYSE:G), Cemex SAB de CV (NYSE:CX), and Williams-Sonoma, Inc. (NYSE:WSM). This group of stocks’ market values are closest to IIVI’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 23.4 hedge funds with bullish positions and the average amount invested in these stocks was $328 million. That figure was $115 million in IIVI’s case. Genpact Limited (NYSE:G) is the most popular stock in this table. On the other hand CAE, Inc. (NYSE:CAE) is the least popular one with only 10 bullish hedge fund positions. II-VI, Inc. (NASDAQ:IIVI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for IIVI is 69.5. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately IIVI wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on IIVI were disappointed as the stock returned 1.4% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.