NeoPhotonics Corp (NPTN) Hedge Funds Are Snapping Up

Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: NeoPhotonics Corp (NYSE:NPTN) .

NeoPhotonics Corp (NYSE:NPTN) was in 20 hedge funds’ portfolios at the end of the third quarter of 2016. NPTN shareholders have witnessed an increase in hedge fund sentiment lately. There were 17 hedge funds in our database with NPTN holdings at the end of the previous quarter. 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 Spok Holdings Inc (NASDAQ:SPOK), Carriage Services, Inc. (NYSE:CSV), and Invacare Corporation (NYSE:IVC) to gather more data points.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading NeoPhotonics Corp (NYSE:NPTN)?

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, an increase of 18% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards NPTN over the last 5 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Mike Masters’ Masters Capital Management has the number one position in NeoPhotonics Corp (NYSE:NPTN), worth close to $16.3 million. Coming in second is Jim Simons’ Renaissance Technologies, holding a $14.1 million position. Remaining peers that hold long positions contain Chuck Royce’s Royce & Associates, Israel Englander’s Millennium Management and Richard Driehaus’s Driehaus Capital. 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.

As industrywide interest jumped, specific money managers have been driving this bullishness. Quentec Asset Management, led by Ken Hahn, established the largest position in NeoPhotonics Corp (NYSE:NPTN). Quentec Asset Management had $7.3 million invested in the company at the end of the quarter. Andrew Sandler’s Sandler Capital Management also initiated a $4.5 million position during the quarter. The following funds were also among the new NPTN investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as NeoPhotonics Corp (NYSE:NPTN) but similarly valued. We will take a look at Spok Holdings Inc (NASDAQ:SPOK), Carriage Services, Inc. (NYSE:CSV), Invacare Corporation (NYSE:IVC), and Medifast, Inc. (NYSE:MED). This group of stocks’ market caps resemble NPTN’s market cap.

As you can see these stocks had an average of 11 hedge funds with bullish positions and the average amount invested in these stocks was $55 million. That figure was $98 million in NPTN’s case. Invacare Corporation (NYSE:IVC) is the most popular stock in this table. On the other hand Spok Holdings Inc (NASDAQ:SPOK) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks NeoPhotonics Corp (NYSE:NPTN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None