Should You Buy nLIGHT, Inc. (LASR)?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of nLIGHT, Inc. (NASDAQ:LASR) based on that data.

nLIGHT, Inc. (NASDAQ:LASR) was in 7 hedge funds’ portfolios at the end of March. LASR investors should be aware of an increase in activity from the world’s largest hedge funds in recent months. There were 6 hedge funds in our database with LASR positions at the end of the previous quarter. Our calculations also showed that LASR 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

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. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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. Keeping this in mind we’re going to review the recent hedge fund action encompassing nLIGHT, Inc. (NASDAQ:LASR).

How have hedgies been trading nLIGHT, Inc. (NASDAQ:LASR)?

At the end of the first quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the fourth quarter of 2019. By comparison, 5 hedge funds held shares or bullish call options in LASR 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, Royce & Associates held the most valuable stake in nLIGHT, Inc. (NASDAQ:LASR), which was worth $8.9 million at the end of the third quarter. On the second spot was Driehaus Capital which amassed $6.9 million worth of shares. Motley Fool Asset Management, Rima Senvest Management, and Citadel Investment Group 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 Motley Fool Asset Management allocated the biggest weight to nLIGHT, Inc. (NASDAQ:LASR), around 0.46% of its 13F portfolio. Rima Senvest Management is also relatively very bullish on the stock, setting aside 0.32 percent of its 13F equity portfolio to LASR.

As aggregate interest increased, specific money managers have been driving this bullishness. PDT Partners, managed by Peter Muller, created the most outsized position in nLIGHT, Inc. (NASDAQ:LASR). PDT Partners had $0.6 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also initiated a $0.3 million position during the quarter.

Let’s now review hedge fund activity in other stocks similar to nLIGHT, Inc. (NASDAQ:LASR). We will take a look at Plantronics, Inc. (NYSE:PLT), WideOpenWest, Inc. (NYSE:WOW), U.S. Lime & Minerals Inc. (NASDAQ:USLM), and Calix Inc (NYSE:CALX). All of these stocks’ market caps match LASR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PLT 6 14594 -5
WOW 15 19500 -1
USLM 3 26406 -1
CALX 15 80773 1
Average 9.75 35318 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.75 hedge funds with bullish positions and the average amount invested in these stocks was $35 million. That figure was $23 million in LASR’s case. WideOpenWest, Inc. (NYSE:WOW) is the most popular stock in this table. On the other hand U.S. Lime & Minerals Inc. (NASDAQ:USLM) is the least popular one with only 3 bullish hedge fund positions. nLIGHT, Inc. (NASDAQ:LASR) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.9% in 2020 through June 10th and still beat the market by 14.2 percentage points. A small number of hedge funds were also right about betting on LASR as the stock returned 122.6% during the second quarter and outperformed the market by an even larger margin.

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