Silicom Ltd. (SILC): Hedge Fund Sentiment Unchanged

In this article you are going to find out whether hedge funds think Silicom Ltd. (NASDAQ:SILC) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Silicom Ltd. (NASDAQ:SILC) shares haven’t seen a lot of action during the first quarter. Overall, hedge fund sentiment was unchanged. The stock was in 5 hedge funds’ portfolios at the end of March. At the end of this article we will also compare SILC to other stocks including Funko, Inc. (NASDAQ:FNKO), Weyco Group, Inc. (NASDAQ:WEYS), and COMSCORE, Inc. (NASDAQ:SCOR) to get a better sense of its popularity.

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

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 stocks recommended/scorned by legendary Bill Miller. 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. Now let’s view the key hedge fund action regarding Silicom Ltd. (NASDAQ:SILC).

What does smart money think about Silicom Ltd. (NASDAQ:SILC)?

At Q1’s end, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SILC over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

Is SILC A Good Stock To Buy?

More specifically, AWH Capital was the largest shareholder of Silicom Ltd. (NASDAQ:SILC), with a stake worth $2.8 million reported as of the end of September. Trailing AWH Capital was Intrepid Capital Management, which amassed a stake valued at $2.6 million. D E Shaw, Renaissance Technologies, and Two Sigma Advisors 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 AWH Capital allocated the biggest weight to Silicom Ltd. (NASDAQ:SILC), around 15.37% of its 13F portfolio. Intrepid Capital Management is also relatively very bullish on the stock, dishing out 1.77 percent of its 13F equity portfolio to SILC.

Earlier we told you that the aggregate hedge fund interest in the stock was unchanged and we view this as a negative development. Even though there weren’t any hedge funds dumping their holdings during the first quarter, there weren’t any hedge funds initiating brand new positions. This indicates that hedge funds, at the very best, perceive this stock as dead money and they haven’t identified any viable catalysts that can attract investor attention.

Let’s go over hedge fund activity in other stocks similar to Silicom Ltd. (NASDAQ:SILC). We will take a look at Funko, Inc. (NASDAQ:FNKO), Weyco Group, Inc. (NASDAQ:WEYS), COMSCORE, Inc. (NASDAQ:SCOR), and Transcat, Inc. (NASDAQ:TRNS). This group of stocks’ market values match SILC’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FNKO 12 11488 -2
WEYS 4 4976 1
SCOR 18 60183 -1
TRNS 7 36708 -1
Average 10.25 28339 -0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $28 million. That figure was $7 million in SILC’s case. COMSCORE, Inc. (NASDAQ:SCOR) is the most popular stock in this table. On the other hand Weyco Group, Inc. (NASDAQ:WEYS) is the least popular one with only 4 bullish hedge fund positions. Silicom Ltd. (NASDAQ:SILC) 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 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. A small number of hedge funds were also right about betting on SILC as the stock returned 24.9% 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.