Is Super Micro Computer, Inc. (SMCI) a Good Stock to Buy?

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The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Super Micro Computer, Inc. (NASDAQ:SMCI).

Super Micro Computer, Inc. (NASDAQ:SMCI) was included in the 13F portfolios of 13 funds tracked by Insider Monkey at the end of September. By comparison, there had been 10 funds long the stock a quarter earlier. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Oxford Industries, Inc. (NYSE:OXM), Beneficial Mutual Bancorp Inc (NASDAQ:BNCL), and Penn National Gaming, Inc (NASDAQ:PENN) to gather more data points.

Follow Super Micro Computer Inc. (NASDAQ:SMCI)

We care about hedge fund sentiment because historically hedge funds’ stock picks delivered strong risk adjusted returns. There are certain segments of the market where hedge funds’ stock picks performed much better than its benchmarks. For instance, the 30 most popular mid-cap stocks among the best performing hedge funds returned 18% over the last 12 months outpacing S&P 500 Index by more than 10 percentage points. We developed this strategy 2.5 years ago and started sharing its picks in our quarterly newsletter. It bested the S&P 500 Index ETFs by delivering a solid 39% vs. 22% gain for its benchmarks.

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Keeping this in mind, let’s analyze the recent action surrounding Super Micro Computer, Inc. (NASDAQ:SMCI).

Hedge fund activity in Super Micro Computer, Inc. (NASDAQ:SMCI)

The number of funds from our database long SMCI advanced by 30% to 13 during the third quarter. The graph below displays the number of hedge funds with bullish position in SMCI over the last five quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Royce & Associates, led by Chuck Royce, holds the most valuable position in Super Micro Computer, Inc. (NASDAQ:SMCI). Royce & Associates has a $20.2 million position in the stock, comprising 0.1% of its 13F portfolio. On Royce & Associates’s heels is Anand Parekh’s Alyeska Investment Group, which holds a $15.3 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish comprise Jim Simons’ Renaissance Technologies and Cliff Asness’ AQR Capital Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

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