Should I Buy Silicon Laboratories (SLAB)?

In this article we will analyze whether Silicon Laboratories (NASDAQ:SLAB) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Silicon Laboratories (NASDAQ:SLAB) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 18 hedge funds’ portfolios at the end of March. Our calculations also showed that SLAB isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). 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 First American Financial Corp (NYSE:FAF), CACI International Inc (NYSE:CACI), and BOK Financial Corporation (NASDAQ:BOKF) to gather more data points.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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 homepage. Keeping this in mind let’s check out the new hedge fund action regarding Silicon Laboratories (NASDAQ:SLAB).

Do Hedge Funds Think SLAB Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 20 hedge funds with a bullish position in SLAB a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Millennium Management held the most valuable stake in Silicon Laboratories (NASDAQ:SLAB), which was worth $78.2 million at the end of the fourth quarter. On the second spot was Peconic Partners LLC which amassed $11.3 million worth of shares. Marshall Wace LLP, D E Shaw, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Peconic Partners LLC allocated the biggest weight to Silicon Laboratories (NASDAQ:SLAB), around 1.19% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.29 percent of its 13F equity portfolio to SLAB.

Seeing as Silicon Laboratories (NASDAQ:SLAB) has witnessed falling interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds that decided to sell off their positions entirely by the end of the first quarter. At the top of the heap,  Highbridge Capital Management sold off the biggest investment of the “upper crust” of funds followed by Insider Monkey, valued at about $24 million in stock. D. E. Shaw’s fund, D E Shaw, also dropped its stock, about $8.4 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Silicon Laboratories (NASDAQ:SLAB) but similarly valued. We will take a look at First American Financial Corp (NYSE:FAF), CACI International Inc (NYSE:CACI), BOK Financial Corporation (NASDAQ:BOKF), Ovintiv Inc. (NYSE:OVV), Coherent, Inc. (NASDAQ:COHR), Stericycle Inc (NASDAQ:SRCL), and The Timken Company (NYSE:TKR). This group of stocks’ market caps are closest to SLAB’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.9 hedge funds with bullish positions and the average amount invested in these stocks was $702 million. That figure was $142 million in SLAB’s case. Coherent, Inc. (NASDAQ:COHR) is the most popular stock in this table. On the other hand BOK Financial Corporation (NASDAQ:BOKF) is the least popular one with only 17 bullish hedge fund positions. Silicon Laboratories (NASDAQ:SLAB) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for SLAB is 26.4. 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 negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and surpassed the market again by 10.1 percentage points. Unfortunately SLAB wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); SLAB investors were disappointed as the stock returned 3.2% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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

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