Were Hedge Funds Illusioned With Microchip Technology Incorporated (MCHP)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the third quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of Microchip Technology Incorporated (NASDAQ:MCHP) based on that data and determine whether they were really smart about the stock.

Microchip Technology Incorporated (NASDAQ:MCHP) has seen a decrease in support from the world’s most elite money managers lately. Microchip Technology Incorporated (NASDAQ:MCHP) was in 41 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 50. There were 50 hedge funds in our database with MCHP holdings at the end of June. Our calculations also showed that MCHP isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. Keeping this in mind let’s take a gander at the key hedge fund action encompassing Microchip Technology Incorporated (NASDAQ:MCHP).

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

Heading into the fourth quarter of 2021, a total of 41 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. By comparison, 35 hedge funds held shares or bullish call options in MCHP a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Kerr Neilson’s Platinum Asset Management has the number one position in Microchip Technology Incorporated (NASDAQ:MCHP), worth close to $301.8 million, accounting for 8.5% of its total 13F portfolio. On Platinum Asset Management’s heels is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $215.6 million position; 0.6% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions include Steve Cohen’s Point72 Asset Management, Ken Griffin’s Citadel Investment Group and David Blood and Al Gore’s Generation Investment Management. In terms of the portfolio weights assigned to each position Glaxis Capital Management allocated the biggest weight to Microchip Technology Incorporated (NASDAQ:MCHP), around 13.16% of its 13F portfolio. Platinum Asset Management is also relatively very bullish on the stock, setting aside 8.5 percent of its 13F equity portfolio to MCHP.

Due to the fact that Microchip Technology Incorporated (NASDAQ:MCHP) has witnessed a decline in interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedge funds who were dropping their entire stakes heading into Q4. At the top of the heap, Joshua Friedman and Mitchell Julis’s Canyon Capital Advisors cut the largest investment of the “upper crust” of funds followed by Insider Monkey, worth about $135.8 million in stock, and Donald Sussman’s Paloma Partners was right behind this move, as the fund dropped about $123.9 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 9 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Microchip Technology Incorporated (NASDAQ:MCHP) but similarly valued. We will take a look at Vodafone Group Plc (NASDAQ:VOD), Biogen Inc. (NASDAQ:BIIB), O’Reilly Automotive Inc (NASDAQ:ORLY), Cadence Design Systems Inc (NASDAQ:CDNS), Roku, Inc. (NASDAQ:ROKU), Schlumberger Limited. (NYSE:SLB), and Lucid Group Inc. (NASDAQ:LCID). This group of stocks’ market values are closest to MCHP’s market value.

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As you can see these stocks had an average of 39.3 hedge funds with bullish positions and the average amount invested in these stocks was $1583 million. That figure was $1122 million in MCHP’s case. Biogen Inc. (NASDAQ:BIIB) is the most popular stock in this table. On the other hand Vodafone Group Plc (NASDAQ:VOD) is the least popular one with only 18 bullish hedge fund positions. Microchip Technology Incorporated (NASDAQ:MCHP) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MCHP is 44.6. 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 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 29.6% in 2021 and still managed to beat the market by another 3.6 percentage points. Hedge funds were somewhat right about betting on MCHP as the stock returned 1.2% since the end of September (through January 31st) and outperformed the top 5 hedge fund stocks but not the market. This is a rare phenomenon as top hedge fund stocks usually beat the market over the long-term.

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