Were Hedge Funds Right About Piling Back Into Coherent, Inc. (COHR)?

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds’ top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Coherent, Inc. (NASDAQ:COHR).

Coherent, Inc. (NASDAQ:COHR) was in 19 hedge funds’ portfolios at the end of June. COHR has experienced an increase in enthusiasm from smart money of late. There were 14 hedge funds in our database with COHR holdings at the end of the previous quarter. Our calculations also showed that COHR 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 21st century investor’s toolkit there are tons of methods stock market investors can use to value their holdings. A couple of the less utilized methods are hedge fund and insider trading indicators. Our researchers have shown that, historically, those who follow the best picks of the best investment managers can outpace the broader indices by a significant amount (see the details here).

Chuck Royce

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a gander at the key hedge fund action encompassing Coherent, Inc. (NASDAQ:COHR).

What does smart money think about Coherent, Inc. (NASDAQ:COHR)?

At the end of the second quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in COHR a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

No of Hedge Funds with COHR Positions

According to Insider Monkey’s hedge fund database, Royce & Associates, managed by Chuck Royce, holds the biggest position in Coherent, Inc. (NASDAQ:COHR). Royce & Associates has a $68.4 million position in the stock, comprising 0.6% of its 13F portfolio. Sitting at the No. 2 spot is Ken Fisher of Fisher Asset Management, with a $40.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism comprise Charles Paquelet’s Skylands Capital, Ed Bosek’s BeaconLight Capital and Ken Griffin’s Citadel Investment Group.

Now, key money managers have been driving this bullishness. Fisher Asset Management, managed by Ken Fisher, assembled the biggest position in Coherent, Inc. (NASDAQ:COHR). Fisher Asset Management had $40.1 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also made a $9.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Dmitry Balyasny’s Balyasny Asset Management, and Israel Englander’s Millennium Management.

Let’s now take a look at hedge fund activity in other stocks similar to Coherent, Inc. (NASDAQ:COHR). These stocks are Clearway Energy, Inc. (NYSE:CWEN), Federated Investors Inc (NYSE:FII), AmeriGas Partners, L.P. (NYSE:APU), and Switch, Inc. (NYSE:SWCH). All of these stocks’ market caps are closest to COHR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CWEN 19 152318 -8
FII 22 274576 9
APU 8 80334 2
SWCH 13 220988 -3
Average 15.5 182054 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $189 million in COHR’s case. Federated Investors Inc (NYSE:FII) is the most popular stock in this table. On the other hand AmeriGas Partners, L.P. (NYSE:APU) is the least popular one with only 8 bullish hedge fund positions. Coherent, Inc. (NASDAQ:COHR) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on COHR as the stock returned 12.7% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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