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Is Maxim Integrated Products Inc. (MXIM) Going to Burn These Hedge Funds?

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Maxim Integrated Products Inc. (NASDAQ:MXIM).

Is Maxim Integrated Products Inc. (NASDAQ:MXIM) the right pick for your portfolio? Hedge funds are getting more bullish. The number of bullish hedge fund bets increased by 1 lately. Our calculations also showed that MXIM isn’t among the 30 most popular stocks among hedge funds  (view the video below). MXIM was in 28 hedge funds’ portfolios at the end of the second quarter of 2019. There were 27 hedge funds in our database with MXIM holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.

MXIM_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to check out the fresh hedge fund action encompassing Maxim Integrated Products Inc. (NASDAQ:MXIM).

What does smart money think about Maxim Integrated Products Inc. (NASDAQ:MXIM)?

Heading into the third quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MXIM over the last 16 quarters. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

AQR CAPITAL MANAGEMENT

Cliff Asness of AQR Capital Management

More specifically, Two Sigma Advisors was the largest shareholder of Maxim Integrated Products Inc. (NASDAQ:MXIM), with a stake worth $66.5 million reported as of the end of March. Trailing Two Sigma Advisors was GLG Partners, which amassed a stake valued at $45.2 million. Renaissance Technologies, AQR Capital Management, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, specific money managers were breaking ground themselves. Mondrian Capital, managed by Tor Minesuk, established the most valuable position in Maxim Integrated Products Inc. (NASDAQ:MXIM). Mondrian Capital had $4.2 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $3 million position during the quarter. The following funds were also among the new MXIM investors: Dipak Patel’s Alight Capital, Leon Shaulov’s Maplelane Capital, and Anand Parekh’s Alyeska Investment Group.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Maxim Integrated Products Inc. (NASDAQ:MXIM) but similarly valued. We will take a look at SK Telecom Co., Ltd. (NYSE:SKM), Principal Financial Group Inc (NASDAQ:PFG), STMicroelectronics N.V. (NYSE:STM), and Citizens Financial Group Inc (NYSE:CFG). All of these stocks’ market caps are similar to MXIM’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SKM 7 52977 1
PFG 17 113373 2
STM 13 111744 -1
CFG 39 1255204 -2
Average 19 383325 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 19 hedge funds with bullish positions and the average amount invested in these stocks was $383 million. That figure was $254 million in MXIM’s case. Citizens Financial Group Inc (NYSE:CFG) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 7 bullish hedge fund positions. Maxim Integrated Products Inc. (NASDAQ:MXIM) is not the most popular stock in this group but hedge fund interest is still above average. 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 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MXIM wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MXIM were disappointed as the stock returned -2.3% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

Disclosure: None. This article was originally published at Insider Monkey.

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