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Should You Buy Cirrus Logic, Inc. (CRUS)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 821 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of March 31st, 2020. What do these smart investors think about Cirrus Logic, Inc. (NASDAQ:CRUS)?

Cirrus Logic, Inc. (NASDAQ:CRUS) was in 28 hedge funds’ portfolios at the end of the first quarter of 2020. CRUS shareholders have witnessed an increase in hedge fund sentiment in recent months. There were 25 hedge funds in our database with CRUS holdings at the end of the previous quarter. Our calculations also showed that CRUS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

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 58 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 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Chuck Royce

Chuck Royce of Royce & Associates

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one as well as this tiny lithium play. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a glance at the new hedge fund action regarding Cirrus Logic, Inc. (NASDAQ:CRUS).

How are hedge funds trading Cirrus Logic, Inc. (NASDAQ:CRUS)?

At the end of the first quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards CRUS over the last 18 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.

Is CRUS A Good Stock To Buy?

Of the funds tracked by Insider Monkey, Cliff Asness’s AQR Capital Management has the biggest position in Cirrus Logic, Inc. (NASDAQ:CRUS), worth close to $97.7 million, comprising 0.2% of its total 13F portfolio. On AQR Capital Management’s heels is Chuck Royce of Royce & Associates, with a $48.3 million position; 0.7% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism comprise Renaissance Technologies, D. E. Shaw’s D E Shaw and Andrew Sandler’s Sandler Capital Management. In terms of the portfolio weights assigned to each position Sandler Capital Management allocated the biggest weight to Cirrus Logic, Inc. (NASDAQ:CRUS), around 2.11% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.66 percent of its 13F equity portfolio to CRUS.

Consequently, some big names were leading the bulls’ herd. Driehaus Capital, managed by Richard Driehaus, established the most outsized position in Cirrus Logic, Inc. (NASDAQ:CRUS). Driehaus Capital had $1.9 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also initiated a $0.8 million position during the quarter. The other funds with brand new CRUS positions are Greg Eisner’s Engineers Gate Manager, Matthew Hulsizer’s PEAK6 Capital Management, and Steve Cohen’s Point72 Asset Management.

Let’s also examine hedge fund activity in other stocks similar to Cirrus Logic, Inc. (NASDAQ:CRUS). These stocks are Tandem Diabetes Care Inc (NASDAQ:TNDM), Cree, Inc. (NASDAQ:CREE), First Financial Bankshares Inc (NASDAQ:FFIN), and Southwest Gas Corporation (NYSE:SWX). This group of stocks’ market valuations are similar to CRUS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TNDM 28 245964 -11
CREE 16 309952 -9
FFIN 14 28294 1
SWX 13 79506 -10
Average 17.75 165929 -7.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $166 million. That figure was $286 million in CRUS’s case. Tandem Diabetes Care Inc (NASDAQ:TNDM) is the most popular stock in this table. On the other hand Southwest Gas Corporation (NYSE:SWX) is the least popular one with only 13 bullish hedge fund positions. Cirrus Logic, Inc. (NASDAQ:CRUS) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately CRUS wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CRUS were disappointed as the stock returned 10.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 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.