Is MTSI Stock A Buy or Sell?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI).

Is MTSI stock a buy? MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) was in 24 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 28. MTSI has seen a decrease in hedge fund interest of late. There were 28 hedge funds in our database with MTSI positions at the end of the third quarter. Our calculations also showed that MTSI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 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. With all of this in mind let’s go over the new hedge fund action surrounding MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI).

Do Hedge Funds Think MTSI Is A Good Stock To Buy Now?

At the end of December, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MTSI over the last 22 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, D E Shaw held the most valuable stake in MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), which was worth $100.1 million at the end of the fourth quarter. On the second spot was Yiheng Capital which amassed $49.8 million worth of shares. Columbus Circle Investors, Arrowstreet Capital, and Schonfeld Strategic Advisors 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 Provenire Capital allocated the biggest weight to MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), around 2.8% of its 13F portfolio. Yiheng Capital is also relatively very bullish on the stock, dishing out 2.29 percent of its 13F equity portfolio to MTSI.

Due to the fact that MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) has experienced declining sentiment from the smart money, it’s safe to say that there were a few hedgies that slashed their entire stakes by the end of the fourth quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the biggest investment of the “upper crust” of funds monitored by Insider Monkey, comprising close to $8.2 million in stock, and Richard Schimel and Lawrence Sapanski’s Cinctive Capital Management was right behind this move, as the fund sold off about $2 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds by the end of the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI). We will take a look at Relay Therapeutics, Inc. (NASDAQ:RLAY), World Wrestling Entertainment, Inc. (NYSE:WWE), Intercorp Financial Services Inc. (NYSE:IFS), Ovintiv Inc. (NYSE:OVV), BlackBerry Limited (NYSE:BB), Balchem Corporation (NASDAQ:BCPC), and Select Medical Holdings Corporation (NYSE:SEM). All of these stocks’ market caps are closest to MTSI’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.6 hedge funds with bullish positions and the average amount invested in these stocks was $306 million. That figure was $284 million in MTSI’s case. BlackBerry Limited (NYSE:BB) is the most popular stock in this table. On the other hand Intercorp Financial Services Inc. (NYSE:IFS) is the least popular one with only 6 bullish hedge fund positions. MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MTSI is 62.7. 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 MTSI wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on MTSI were disappointed as the stock returned 8.3% 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.

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

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