Were Hedge Funds Right About Flocking Into Silicon Laboratories Inc. (SLAB) ?

Does Silicon Laboratories Inc. (NASDAQ:SLAB) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Silicon Laboratories Inc. (NASDAQ:SLAB) has experienced an increase in enthusiasm from smart money in recent months. Our calculations also showed that SLAB isn’t among the 30 most popular stocks among hedge funds (view 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.


We’re going to take a look at the new hedge fund action surrounding Silicon Laboratories Inc. (NASDAQ:SLAB).

How have hedgies been trading Silicon Laboratories Inc. (NASDAQ:SLAB)?

Heading into the third quarter of 2019, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of 50% from the first quarter of 2019. On the other hand, there were a total of 13 hedge funds with a bullish position in SLAB a year ago. With hedgies’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).

Noam Gottesman GLG Partners

The largest stake in Silicon Laboratories Inc. (NASDAQ:SLAB) was held by Carlson Capital, which reported holding $14.2 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $11.5 million position. Other investors bullish on the company included Millennium Management, D E Shaw, and Polar Capital.

Consequently, key hedge funds have been driving this bullishness. Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, created the largest position in Silicon Laboratories Inc. (NASDAQ:SLAB). Polar Capital had $7.1 million invested in the company at the end of the quarter. Renaissance Technologies also made a $7 million investment in the stock during the quarter. The following funds were also among the new SLAB investors: Noam Gottesman’s GLG Partners, Dmitry Balyasny’s Balyasny Asset Management, and Charles Davidson and Joseph Jacobs’s Wexford Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Silicon Laboratories Inc. (NASDAQ:SLAB) but similarly valued. We will take a look at The Wendy’s Company (NASDAQ:WEN), Fluor Corporation (NYSE:FLR), NewMarket Corporation (NYSE:NEU), and Highwoods Properties Inc (NYSE:HIW). This group of stocks’ market valuations match SLAB’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WEN 24 914976 -3
FLR 21 286630 -1
NEU 20 88622 -1
HIW 13 165968 -1
Average 19.5 364049 -1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.5 hedge funds with bullish positions and the average amount invested in these stocks was $364 million. That figure was $74 million in SLAB’s case. The Wendy’s Company (NASDAQ:WEN) is the most popular stock in this table. On the other hand Highwoods Properties Inc (NYSE:HIW) is the least popular one with only 13 bullish hedge fund positions. Silicon Laboratories Inc. (NASDAQ:SLAB) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. A small number of hedge funds were also right about betting on SLAB as the stock returned 7.7% during the same time frame and outperformed the market by an even larger margin.

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