Was The Smart Money Right About Microchip Technology (MCHP)?

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. We at Insider Monkey have plowed through 887 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article we look at what those investors think of Microchip Technology Incorporated (NASDAQ:MCHP).

Microchip Technology Incorporated (NASDAQ:MCHP) was in 45 hedge funds’ portfolios at the end of December. The all time high for this statistic is 46. MCHP has seen an increase in hedge fund sentiment of late. There were 35 hedge funds in our database with MCHP holdings at the end of September. Our calculations also showed that MCHP isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. 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 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Kerr Neilson of Platinum Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. 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. With all of this in mind let’s check out the key hedge fund action regarding Microchip Technology Incorporated (NASDAQ:MCHP).

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

At the end of the fourth quarter, a total of 45 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 29% from the third quarter of 2020. On the other hand, there were a total of 46 hedge funds with a bullish position in MCHP a year ago. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Is MCHP A Good Stock To Buy?

When looking at the institutional investors followed by Insider Monkey, Platinum Asset Management, managed by Kerr Neilson, holds the number one position in Microchip Technology Incorporated (NASDAQ:MCHP). Platinum Asset Management has a $286.5 million position in the stock, comprising 6.6% of its 13F portfolio. Sitting at the No. 2 spot is Steve Cohen of Point72 Asset Management, with a $145.1 million position; 0.7% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism consist of D. E. Shaw’s D E Shaw, David Blood and Al Gore’s Generation Investment Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Platinum Asset Management allocated the biggest weight to Microchip Technology Incorporated (NASDAQ:MCHP), around 6.59% of its 13F portfolio. Discovery Capital Management is also relatively very bullish on the stock, designating 4.37 percent of its 13F equity portfolio to MCHP.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. Cavalry Asset Management, managed by John Hurley, initiated the largest position in Microchip Technology Incorporated (NASDAQ:MCHP). Cavalry Asset Management had $38.7 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $26.8 million position during the quarter. The other funds with brand new MCHP positions are David Fiszel’s Honeycomb Asset Management, Brandon Haley’s Holocene Advisors, and Suraj Parkash Chopra’s Force Hill Capital Management.

Let’s go over hedge fund activity in other stocks similar to Microchip Technology Incorporated (NASDAQ:MCHP). We will take a look at Cintas Corporation (NASDAQ:CTAS), Chewy, Inc. (NYSE:CHWY), MSCI Inc (NYSE:MSCI), Brown-Forman Corporation (NYSE:BF), ING Groep N.V. (NYSE:ING), Sempra Energy (NYSE:SRE), and Eni SpA (NYSE:E). This group of stocks’ market valuations match MCHP’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CTAS 36 746276 -2
CHWY 38 728528 -8
MSCI 41 984592 -6
BF 29 1575074 -3
ING 9 397074 0
SRE 33 778325 1
E 4 42161 -1
Average 27.1 750290 -2.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.1 hedge funds with bullish positions and the average amount invested in these stocks was $750 million. That figure was $961 million in MCHP’s case. MSCI Inc (NYSE:MSCI) is the most popular stock in this table. On the other hand Eni SpA (NYSE:E) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Microchip Technology Incorporated (NASDAQ:MCHP) is more popular among hedge funds. Our overall hedge fund sentiment score for MCHP is 89.3. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Unfortunately MCHP wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MCHP were disappointed as the stock returned 9.1% since the end of the fourth quarter (through 4/30) 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 most of these stocks already outperformed the market since 2019.

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