Is Pixelworks, Inc. (PXLW) A Good Stock To Buy?

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 Pixelworks, Inc. (NASDAQ:PXLW).

Pixelworks, Inc. (NASDAQ:PXLW) was in 9 hedge funds’ portfolios at the end of the third quarter of 2019. PXLW shareholders have witnessed an increase in enthusiasm from smart money lately. There were 7 hedge funds in our database with PXLW holdings at the end of the previous quarter. Our calculations also showed that PXLW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


Jim Simons of Renaissance Technologies

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. 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 even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy  based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. Let’s take a peek at the key hedge fund action encompassing Pixelworks, Inc. (NASDAQ:PXLW).

How are hedge funds trading Pixelworks, Inc. (NASDAQ:PXLW)?

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey were long this stock, a change of 29% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards PXLW over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is PXLW A Good Stock To Buy?

The largest stake in Pixelworks, Inc. (NASDAQ:PXLW) was held by Renaissance Technologies, which reported holding $4 million worth of stock at the end of September. It was followed by Winton Capital Management with a $1 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position Algert Coldiron Investors allocated the biggest weight to Pixelworks, Inc. (NASDAQ:PXLW), around 0.08% of its 13F portfolio. HighVista Strategies is also relatively very bullish on the stock, designating 0.06 percent of its 13F equity portfolio to PXLW.

As aggregate interest increased, some big names were breaking ground themselves. Winton Capital Management, managed by David Harding, created the largest position in Pixelworks, Inc. (NASDAQ:PXLW). Winton Capital Management had $1 million invested in the company at the end of the quarter. Andre F. Perold’s HighVista Strategies also initiated a $0.1 million position during the quarter.

Let’s check out hedge fund activity in other stocks similar to Pixelworks, Inc. (NASDAQ:PXLW). We will take a look at Concert Pharmaceuticals Inc (NASDAQ:CNCE), Pioneer Bancorp, Inc. (NASDAQ:PBFS), CSI Compressco LP (NASDAQ:CCLP), and Universal Technical Institute, Inc. (NYSE:UTI). This group of stocks’ market values are similar to PXLW’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CNCE 12 21376 -1
PBFS 6 4932 6
CCLP 3 1881 -1
UTI 7 42341 2
Average 7 17633 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $7 million in PXLW’s case. Concert Pharmaceuticals Inc (NASDAQ:CNCE) is the most popular stock in this table. On the other hand CSI Compressco LP (NASDAQ:CCLP) is the least popular one with only 3 bullish hedge fund positions. Pixelworks, Inc. (NASDAQ:PXLW) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately PXLW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on PXLW were disappointed as the stock returned -8.9% during the fourth quarter (through the end of November) 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.