Is SWKS A Good Stock To Buy Now?

With the third-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 fourth quarter. One of these stocks was Skyworks Solutions Inc (NASDAQ:SWKS).

Is SWKS a good stock to buy now? Skyworks Solutions Inc (NASDAQ:SWKS) has seen an increase in hedge fund interest recently. Skyworks Solutions Inc (NASDAQ:SWKS) was in 50 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 49. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 49 hedge funds in our database with SWKS holdings at the end of June. Our calculations also showed that SWKS 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Charles Clough of Clough Capital Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 5 best cheap stocks to buy according to Ray Dalio to identify stocks with upside potential. 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 analyze the fresh hedge fund action encompassing Skyworks Solutions Inc (NASDAQ:SWKS).

What have hedge funds been doing with Skyworks Solutions Inc (NASDAQ:SWKS)?

Heading into the fourth quarter of 2020, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the second quarter of 2020. The graph below displays the number of hedge funds with bullish position in SWKS over the last 21 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is SWKS A Good Stock To Buy?

The largest stake in Skyworks Solutions Inc (NASDAQ:SWKS) was held by AQR Capital Management, which reported holding $299.3 million worth of stock at the end of September. It was followed by Platinum Asset Management with a $123.6 million position. Other investors bullish on the company included Citadel Investment Group, Cavalry Asset Management, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Cavalry Asset Management allocated the biggest weight to Skyworks Solutions Inc (NASDAQ:SWKS), around 9.26% of its 13F portfolio. Breakline Capital is also relatively very bullish on the stock, setting aside 3.75 percent of its 13F equity portfolio to SWKS.

As one would reasonably expect, key hedge funds have been driving this bullishness. Black-and-White Capital, managed by Seth Wunder, assembled the most outsized position in Skyworks Solutions Inc (NASDAQ:SWKS). Black-and-White Capital had $17.6 million invested in the company at the end of the quarter. Charles Clough’s Clough Capital Partners also initiated a $9.3 million position during the quarter. The following funds were also among the new SWKS investors: Jerry Kochanski’s Shelter Haven Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Minhua Zhang’s Weld Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Skyworks Solutions Inc (NASDAQ:SWKS) but similarly valued. We will take a look at China Telecom Corporation Limited (NYSE:CHA), The Trade Desk, Inc. (NASDAQ:TTD), McKesson Corporation (NYSE:MCK), Williams Companies, Inc. (NYSE:WMB), Sun Life Financial Inc. (NYSE:SLF), New Oriental Education & Technology Group Inc. (NYSE:EDU), and Unity Software Inc. (NYSE:U). This group of stocks’ market caps match SWKS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHA 3 30054 -2
TTD 23 510796 3
MCK 54 1770079 -7
WMB 38 581626 -3
SLF 13 28463 -1
EDU 40 1753600 1
U 35 6701726 35
Average 29.4 1625192 3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.4 hedge funds with bullish positions and the average amount invested in these stocks was $1625 million. That figure was $886 million in SWKS’s case. McKesson Corporation (NYSE:MCK) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 3 bullish hedge fund positions. Skyworks Solutions Inc (NASDAQ:SWKS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SWKS is 82.1. 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. 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 31.6% in 2020 through December 2nd and beat the market again by 16 percentage points. Unfortunately SWKS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SWKS were disappointed as the stock returned -1.1% since the end of September (through 12/2) 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.

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