Were Hedge Funds Right About Piling Into Analog Devices (ADI)?

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter of 2021. One of these stocks was Analog Devices, Inc. (NASDAQ:ADI).

Analog Devices, Inc. (NASDAQ:ADI) was in 58 hedge funds’ portfolios at the end of December. The all time high for this statistic was previously 52. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. ADI has experienced an increase in hedge fund interest lately. There were 52 hedge funds in our database with ADI holdings at the end of September. Our calculations also showed that ADI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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Do Hedge Funds Think ADI Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 58 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ADI over the last 22 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ADI A Good Stock To Buy?

Among these funds, Generation Investment Management held the most valuable stake in Analog Devices, Inc. (NASDAQ:ADI), which was worth $865 million at the end of the fourth quarter. On the second spot was Cantillon Capital Management which amassed $725.5 million worth of shares. Soroban Capital Partners, Citadel Investment Group, and First Pacific Advisors LLC 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 Totem Point Management allocated the biggest weight to Analog Devices, Inc. (NASDAQ:ADI), around 5.7% of its 13F portfolio. Cantillon Capital Management is also relatively very bullish on the stock, earmarking 5.44 percent of its 13F equity portfolio to ADI.

With a general bullishness amongst the heavyweights, key money managers have jumped into Analog Devices, Inc. (NASDAQ:ADI) headfirst. Holocene Advisors, managed by Brandon Haley, created the biggest position in Analog Devices, Inc. (NASDAQ:ADI). Holocene Advisors had $188.7 million invested in the company at the end of the quarter. Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management also made a $166.7 million investment in the stock during the quarter. The other funds with brand new ADI positions are Gabriel Plotkin’s Melvin Capital Management, John Armitage’s Egerton Capital Limited, and Ricky Sandler’s Eminence Capital.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Analog Devices, Inc. (NASDAQ:ADI) but similarly valued. These stocks are Equinor ASA (NYSE:EQNR), Moody’s Corporation (NYSE:MCO), Twilio Inc. (NYSE:TWLO), Humana Inc (NYSE:HUM), Illumina, Inc. (NASDAQ:ILMN), Westpac Banking Corporation (NYSE:WBK), and Banco Santander, S.A. (NYSE:SAN). This group of stocks’ market valuations are similar to ADI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EQNR 18 238582 -2
MCO 59 11352402 -1
TWLO 94 5011455 23
HUM 59 3966420 -2
ILMN 45 1747647 1
WBK 3 29715 -1
SAN 14 415472 0
Average 41.7 3251670 2.6

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.7 hedge funds with bullish positions and the average amount invested in these stocks was $3252 million. That figure was $5320 million in ADI’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Westpac Banking Corporation (NYSE:WBK) is the least popular one with only 3 bullish hedge fund positions. Analog Devices, Inc. (NASDAQ:ADI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ADI is 70.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and beat the market again by 1.6 percentage points. Unfortunately ADI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on ADI were disappointed as the stock returned 4.1% since the end of December (through 4/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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