In this article we will check out the progression of hedge fund sentiment towards NXP Semiconductors NV (NASDAQ:NXPI) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is NXP Semiconductors NV (NASDAQ:NXPI) a good stock to buy now? NXPI investors should be aware of an increase in enthusiasm from smart money of late. NXP Semiconductors NV (NASDAQ:NXPI) was in 68 hedge funds’ portfolios at the end of September. The all time high for this statistics is 93. There were 67 hedge funds in our database with NXPI positions at the end of the second quarter. Our calculations also showed that NXPI 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 leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy 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. With all of this in mind let’s take a glance at the key hedge fund action encompassing NXP Semiconductors NV (NASDAQ:NXPI).
How have hedgies been trading NXP Semiconductors NV (NASDAQ:NXPI)?
At the end of the third quarter, a total of 68 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 1% from the second quarter of 2020. On the other hand, there were a total of 62 hedge funds with a bullish position in NXPI a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Whale Rock Capital Management, managed by Alex Sacerdote, holds the biggest position in NXP Semiconductors NV (NASDAQ:NXPI). Whale Rock Capital Management has a $336.1 million position in the stock, comprising 2.2% of its 13F portfolio. The second most bullish fund manager is Fisher Asset Management, led by Ken Fisher, holding a $141.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of Steve Cohen’s Point72 Asset Management, Brandon Haley’s Holocene Advisors and Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC. In terms of the portfolio weights assigned to each position Mountain Road Advisors allocated the biggest weight to NXP Semiconductors NV (NASDAQ:NXPI), around 7.65% of its 13F portfolio. Sessa Capital is also relatively very bullish on the stock, setting aside 5.96 percent of its 13F equity portfolio to NXPI.
Now, specific money managers have jumped into NXP Semiconductors NV (NASDAQ:NXPI) headfirst. Newbrook Capital Advisors, managed by Robert Boucai, created the most valuable position in NXP Semiconductors NV (NASDAQ:NXPI). Newbrook Capital Advisors had $50.5 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $10.7 million investment in the stock during the quarter. The following funds were also among the new NXPI investors: Bijan Modanlou, Joseph Bou-Saba, and Jayaveera Kodali’s Alta Park Capital, George Soros’s Soros Fund Management, and Cliff Asness’s AQR Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as NXP Semiconductors NV (NASDAQ:NXPI) but similarly valued. These stocks are Exelon Corporation (NYSE:EXC), Chipotle Mexican Grill, Inc. (NYSE:CMG), Enterprise Products Partners L.P. (NYSE:EPD), Sempra Energy (NYSE:SRE), O’Reilly Automotive Inc (NASDAQ:ORLY), Seattle Genetics, Inc. (NASDAQ:SGEN), and ICICI Bank Limited (NYSE:IBN). This group of stocks’ market caps match NXPI’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 36.1 hedge funds with bullish positions and the average amount invested in these stocks was $2588 million. That figure was $1637 million in NXPI’s case. O’Reilly Automotive Inc (NASDAQ:ORLY) is the most popular stock in this table. On the other hand ICICI Bank Limited (NYSE:IBN) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks NXP Semiconductors NV (NASDAQ:NXPI) is more popular among hedge funds. Our overall hedge fund sentiment score for NXPI is 77.9. 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 returned 30.7% in 2020 through November 27th but still managed to beat the market by 16.1 percentage points. Hedge funds were also right about betting on NXPI as the stock returned 27.3% since the end of September (through 11/27) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.