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Were Hedge Funds Right About Flocking Into Skyworks Solutions Inc (SWKS)?

The elite funds run by legendary investors such as David Tepper and Dan Loeb make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentives to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Skyworks Solutions Inc (NASDAQ:SWKS) from the perspective of those elite funds.

Is Skyworks Solutions Inc (NASDAQ:SWKS) a bargain? Investors who are in the know are in a bullish mood. The number of long hedge fund bets inched up by 6 recently. Our calculations also showed that SWKS isn’t among the 30 most popular stocks among hedge funds.

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 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 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David Harding

We’re going to take a peek at the new hedge fund action regarding Skyworks Solutions Inc (NASDAQ:SWKS).

What does the smart money think about Skyworks Solutions Inc (NASDAQ:SWKS)?

Heading into the second quarter of 2019, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the fourth quarter of 2018. The graph below displays the number of hedge funds with bullish position in SWKS over the last 15 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

SWKS_jun2019

When looking at the institutional investors followed by Insider Monkey, Cliff Asness’s AQR Capital Management has the number one position in Skyworks Solutions Inc (NASDAQ:SWKS), worth close to $239.8 million, comprising 0.3% of its total 13F portfolio. On AQR Capital Management’s heels is Platinum Asset Management, managed by Kerr Neilson, which holds a $159.1 million position; 3.7% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism comprise Anand Parekh’s Alyeska Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Jim Simons’s Renaissance Technologies.

As one would reasonably expect, key hedge funds were breaking ground themselves. Maplelane Capital, managed by Leon Shaulov, created the most outsized position in Skyworks Solutions Inc (NASDAQ:SWKS). Maplelane Capital had $21.9 million invested in the company at the end of the quarter. Leon Shaulov’s Maplelane Capital also initiated a $16.5 million position during the quarter. The following funds were also among the new SWKS investors: Kevin Cottrell and Chris LaSusa’s KCL Capital, David Harding’s Winton Capital Management, and Jeffrey Talpins’s Element Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Skyworks Solutions Inc (NASDAQ:SWKS) but similarly valued. These stocks are Cardinal Health, Inc. (NYSE:CAH), Fortinet Inc (NASDAQ:FTNT), New Oriental Education & Tech Group Inc. (NYSE:EDU), and American Airlines Group Inc (NASDAQ:AAL). All of these stocks’ market caps are closest to SWKS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAH 26 849877 -9
FTNT 34 1245315 1
EDU 28 932754 3
AAL 41 2032858 -4
Average 32.25 1265201 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.25 hedge funds with bullish positions and the average amount invested in these stocks was $1265 million. That figure was $964 million in SWKS’s case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand Cardinal Health, Inc. (NYSE:CAH) is the least popular one with only 26 bullish hedge fund positions. Skyworks Solutions Inc (NASDAQ:SWKS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately SWKS wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SWKS were disappointed as the stock returned -16.8% during the same period 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 13 of these stocks already outperformed the market so far in Q2.

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

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