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Were Hedge Funds Right About Kulicke and Soffa Industries Inc. (KLIC)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. 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. Insider Monkey finished processing 835 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2019. In this article we are going to take a look at smart money sentiment towards Kulicke and Soffa Industries Inc. (NASDAQ:KLIC).

Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) was in 22 hedge funds’ portfolios at the end of the fourth quarter of 2019. KLIC investors should pay attention to an increase in support from the world’s most elite money managers of late. There were 20 hedge funds in our database with KLIC positions at the end of the previous quarter. Our calculations also showed that KLIC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

In today’s marketplace there are a large number of gauges market participants use to analyze publicly traded companies. A couple of the most underrated gauges are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the top picks of the top fund managers can outperform the broader indices by a very impressive margin (see the details here).

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve and other Central Banks are tripping over each other to print more money. As a result, we believe gold stocks will outperform fixed income ETFs in the long-term. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to view the new hedge fund action regarding Kulicke and Soffa Industries Inc. (NASDAQ:KLIC).

What does smart money think about Kulicke and Soffa Industries Inc. (NASDAQ:KLIC)?

At Q4’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from the third quarter of 2019. The graph below displays the number of hedge funds with bullish position in KLIC over the last 18 quarters. With hedgies’ sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Among these funds, Whale Rock Capital Management held the most valuable stake in Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), which was worth $93.4 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $87.2 million worth of shares. D E Shaw, Renaissance Technologies, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Nishkama Capital allocated the biggest weight to Kulicke and Soffa Industries Inc. (NASDAQ:KLIC), around 6.1% of its 13F portfolio. Valueworks LLC is also relatively very bullish on the stock, setting aside 3.76 percent of its 13F equity portfolio to KLIC.

With a general bullishness amongst the heavyweights, some big names have been driving this bullishness. PDT Partners, managed by Peter Muller, initiated the biggest position in Kulicke and Soffa Industries Inc. (NASDAQ:KLIC). PDT Partners had $1.2 million invested in the company at the end of the quarter. Donald Sussman’s Paloma Partners also initiated a $0.3 million position during the quarter. The following funds were also among the new KLIC investors: Thomas Bailard’s Bailard Inc and Steve Cohen’s Point72 Asset Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) but similarly valued. These stocks are Eventbrite, Inc. (NYSE:EB), InterDigital, Inc. (NASDAQ:IDCC), USANA Health Sciences, Inc. (NYSE:USNA), and Dril-Quip, Inc. (NYSE:DRQ). This group of stocks’ market valuations match KLIC’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EB 24 321993 1
IDCC 27 300116 0
USNA 12 196149 -2
DRQ 21 129761 1
Average 21 237005 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $340 million in KLIC’s case. InterDigital, Inc. (NASDAQ:IDCC) is the most popular stock in this table. On the other hand USANA Health Sciences, Inc. (NYSE:USNA) is the least popular one with only 12 bullish hedge fund positions. Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 13.0% in 2020 through April 6th but beat the market by 4.2 percentage points. Unfortunately KLIC wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on KLIC were disappointed as the stock returned -18.2% during the same time 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 many of these stocks already outperformed the market so far this year.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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

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