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Is PDF Solutions, Inc. (PDFS) A Good Stock To Buy ?

Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards PDF Solutions, Inc. (NASDAQ:PDFS) changed during the first quarter.

Is PDF Solutions, Inc. (NASDAQ:PDFS) undervalued? Hedge funds are betting on the stock. The number of bullish hedge fund positions advanced by 3 recently. Our calculations also showed that PDFS isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). PDFS was in 11 hedge funds’ portfolios at the end of September. There were 8 hedge funds in our database with PDFS positions 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.

To most market participants, hedge funds are assumed to be unimportant, outdated financial tools of the past. While there are greater than 8000 funds with their doors open at the moment, Our researchers look at the elite of this club, around 750 funds. These investment experts watch over bulk of the smart money’s total asset base, and by watching their matchless stock picks, Insider Monkey has spotted various investment strategies that have historically outrun Mr. Market. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Paul Marshall Marshall Wace

Paul Marshall of Marshall Wace

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the key hedge fund action surrounding PDF Solutions, Inc. (NASDAQ:PDFS).

What does smart money think about PDF Solutions, Inc. (NASDAQ:PDFS)?

At the end of the third quarter, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 38% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards PDFS over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in PDF Solutions, Inc. (NASDAQ:PDFS) was held by Divisar Capital, which reported holding $9.5 million worth of stock at the end of September. It was followed by Royce & Associates with a $6.5 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Divisar Capital allocated the biggest weight to PDF Solutions, Inc. (NASDAQ:PDFS), around 3.17% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, dishing out 0.06 percent of its 13F equity portfolio to PDFS.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. Winton Capital Management, managed by David Harding, initiated the most outsized position in PDF Solutions, Inc. (NASDAQ:PDFS). Winton Capital Management had $0.3 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.2 million position during the quarter. The other funds with brand new PDFS positions are Michael Gelband’s ExodusPoint Capital, Cliff Asness’s AQR Capital Management, and Paul Marshall and Ian Wace’s Marshall Wace.

Let’s now take a look at hedge fund activity in other stocks similar to PDF Solutions, Inc. (NASDAQ:PDFS). These stocks are Clean Energy Fuels Corp (NASDAQ:CLNE), Donnelley Financial Solutions, Inc. (NYSE:DFIN), Jianpu Technology Inc. (NYSE:JT), and PennantPark Investment Corp. (NASDAQ:PNNT). This group of stocks’ market caps match PDFS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLNE 10 22186 2
DFIN 13 49425 1
JT 5 24532 1
PNNT 10 18868 1
Average 9.5 28753 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $29 million. That figure was $23 million in PDFS’s case. Donnelley Financial Solutions, Inc. (NYSE:DFIN) is the most popular stock in this table. On the other hand Jianpu Technology Inc. (NYSE:JT) is the least popular one with only 5 bullish hedge fund positions. PDF Solutions, Inc. (NASDAQ:PDFS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on PDFS as the stock returned 21.2% during the fourth quarter (through the end of November) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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