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Were Hedge Funds Right About Selling Vishay Intertechnology, Inc. (VSH)?

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 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Vishay Intertechnology, Inc. (NYSE:VSH).

Vishay Intertechnology, Inc. (NYSE:VSH) investors should be aware of a decrease in hedge fund sentiment in recent months. VSH was in 20 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 23 hedge funds in our database with VSH positions at the end of the previous quarter. Our calculations also showed that VSH 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).

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Matthew Hulsizer PEAK6 Capital

Matthew Hulsizer of PEAK6 Capital

We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. 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 let’s take a glance at the key hedge fund action encompassing Vishay Intertechnology, Inc. (NYSE:VSH).

How have hedgies been trading Vishay Intertechnology, Inc. (NYSE:VSH)?

At Q4’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -13% from one quarter earlier. On the other hand, there were a total of 19 hedge funds with a bullish position in VSH a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, AQR Capital Management held the most valuable stake in Vishay Intertechnology, Inc. (NYSE:VSH), which was worth $116.2 million at the end of the third quarter. On the second spot was Fisher Asset Management which amassed $94.8 million worth of shares. Royce & Associates, 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 Mountaineer Partners Management allocated the biggest weight to Vishay Intertechnology, Inc. (NYSE:VSH), around 10.37% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, designating 0.56 percent of its 13F equity portfolio to VSH.

Seeing as Vishay Intertechnology, Inc. (NYSE:VSH) has witnessed falling interest from hedge fund managers, logic holds that there lies a certain “tier” of funds that elected to cut their entire stakes in the third quarter. Intriguingly, Dmitry Balyasny’s Balyasny Asset Management dropped the largest stake of the “upper crust” of funds watched by Insider Monkey, worth an estimated $1.5 million in stock. Donald Sussman’s fund, Paloma Partners, also said goodbye to its stock, about $1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to Vishay Intertechnology, Inc. (NYSE:VSH). These stocks are Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Atlas Corp. (NYSE:SSW), II-VI, Inc. (NASDAQ:IIVI), and International Game Technology PLC (NYSE:IGT). This group of stocks’ market caps match VSH’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SBGI 33 406464 4
SSW 15 1150151 3
IIVI 18 127641 -14
IGT 30 211118 2
Average 24 473844 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $474 million. That figure was $363 million in VSH’s case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand Atlas Corp. (NYSE:SSW) is the least popular one with only 15 bullish hedge fund positions. Vishay Intertechnology, Inc. (NYSE:VSH) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and 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 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately VSH wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VSH investors were disappointed as the stock returned -30.1% 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 most of these stocks already outperformed the market in Q1.
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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