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Were Hedge Funds Right About Dumping Himax Technologies, Inc. (HIMX)?

Is Himax Technologies, Inc. (NASDAQ:HIMX) a good equity to bet on 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.

Himax Technologies, Inc. (NASDAQ:HIMX) shareholders have witnessed a decrease in hedge fund sentiment recently. Our calculations also showed that HIMX isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 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.

Ken Griffin

We’re going to go over the fresh hedge fund action surrounding Himax Technologies, Inc. (NASDAQ:HIMX).

How have hedgies been trading Himax Technologies, Inc. (NASDAQ:HIMX)?

At Q3’s end, a total of 2 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -75% from the previous quarter. By comparison, 10 hedge funds held shares or bullish call options in HIMX a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

HIMX_nov2019

Among these funds, Yiheng Capital held the most valuable stake in Himax Technologies, Inc. (NASDAQ:HIMX), which was worth $8.6 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $1.8 million worth of shares.

Judging by the fact that Himax Technologies, Inc. (NASDAQ:HIMX) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of money managers who were dropping their full holdings by the end of the third quarter. Interestingly, Tor Minesuk’s Mondrian Capital cut the largest position of the 750 funds followed by Insider Monkey, totaling close to $1.1 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund cut about $0.7 million worth. These moves are interesting, as aggregate hedge fund interest fell by 6 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Himax Technologies, Inc. (NASDAQ:HIMX) but similarly valued. These stocks are Roadrunner Transportation Systems Inc (NYSE:RRTS), Avedro, Inc. (NASDAQ:AVDR), Bar Harbor Bankshares (NYSE:BHB), and Establishment Labs Holdings Inc. (NASDAQ:ESTA). This group of stocks’ market valuations match HIMX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RRTS 3 356938 1
AVDR 7 116451 -1
BHB 6 16384 3
ESTA 7 57678 0
Average 5.75 136863 0.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $10 million in HIMX’s case. Avedro, Inc. (NASDAQ:AVDR) is the most popular stock in this table. On the other hand Roadrunner Transportation Systems Inc (NYSE:RRTS) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Himax Technologies, Inc. (NASDAQ:HIMX) is even less popular than RRTS. Hedge funds dodged a bullet by taking a bearish stance towards HIMX. Our calculations showed that the top 20 most popular hedge fund stocks returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Unfortunately HIMX wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was very bearish); HIMX investors were disappointed as the stock returned -4.4% during the fourth quarter (through 11/22) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market so far in Q4.

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

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