Is Semtech Corporation (SMTC) A Good Stock To Buy ?

We at Insider Monkey have gone over 700 13F filings that hedge funds and prominent investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Semtech Corporation (NASDAQ:SMTC).

Semtech Corporation (NASDAQ:SMTC) was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2018. SMTC has experienced an increase in hedge fund sentiment lately. There were 13 hedge funds in our database with SMTC holdings at the end of the previous quarter. Our calculations also showed that smtc isn’t among the 30 most popular stocks among hedge funds.

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’ 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 32 percentage points since May 2014 through March 12, 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.


Let’s check out the fresh hedge fund action regarding Semtech Corporation (NASDAQ:SMTC).

What does the smart money think about Semtech Corporation (NASDAQ:SMTC)?

Heading into the first quarter of 2019, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 46% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in SMTC a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds With SMTC Positions

The largest stake in Semtech Corporation (NASDAQ:SMTC) was held by Renaissance Technologies, which reported holding $31.3 million worth of stock at the end of September. It was followed by Millennium Management with a $23.4 million position. Other investors bullish on the company included Fisher Asset Management, Columbus Circle Investors, and D E Shaw.

Now, some big names have been driving this bullishness. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, established the most outsized position in Semtech Corporation (NASDAQ:SMTC). Polar Capital had $5.1 million invested in the company at the end of the quarter. Joel Greenblatt’s Gotham Asset Management also initiated a $3.3 million position during the quarter. The following funds were also among the new SMTC investors: Paul Tudor Jones’s Tudor Investment Corp, Andrew Feldstein and Stephen Siderow’s Blue Mountain Capital, and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Semtech Corporation (NASDAQ:SMTC) but similarly valued. We will take a look at Trinity Industries, Inc. (NYSE:TRN), Hutchison China MediTech Limited (NASDAQ:HCM), Holly Energy Partners, L.P. (NYSE:HEP), and MFA Financial, Inc. (NYSE:MFA). All of these stocks’ market caps are similar to SMTC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TRN 27 766580 -6
HCM 5 5434 -4
HEP 2 2881 -1
MFA 18 177049 4
Average 13 237986 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $238 million. That figure was $117 million in SMTC’s case. Trinity Industries, Inc. (NYSE:TRN) is the most popular stock in this table. On the other hand Holly Energy Partners, L.P. (NYSE:HEP) is the least popular one with only 2 bullish hedge fund positions. Semtech Corporation (NASDAQ:SMTC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on SMTC, though not to the same extent, as the stock returned 17.9% and outperformed the market as well.

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