Were These Hedge Funds Right About Getting Into Maxim Integrated Products Inc. (MXIM)?

Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Maxim Integrated Products Inc. (NASDAQ:MXIM).

Is Maxim Integrated Products Inc. (NASDAQ:MXIM) a worthy investment right now? Investors who are in the know were turning bullish. The number of bullish hedge fund bets advanced by 3 recently. Maxim Integrated Products Inc. (NASDAQ:MXIM) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 37. Our calculations also showed that MXIM isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 30 hedge funds in our database with MXIM holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 58 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.

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 biggest insurance companies to identify fast growing companies in various industries. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to take a look at the new hedge fund action encompassing Maxim Integrated Products Inc. (NASDAQ:MXIM).

How have hedgies been trading Maxim Integrated Products Inc. (NASDAQ:MXIM)?

Heading into the third quarter of 2020, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of 10% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MXIM over the last 20 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.

More specifically, AQR Capital Management was the largest shareholder of Maxim Integrated Products Inc. (NASDAQ:MXIM), with a stake worth $68.3 million reported as of the end of June. Trailing AQR Capital Management was Point72 Asset Management, which amassed a stake valued at $40.7 million. Two Sigma Advisors, Balyasny Asset Management, and Renaissance Technologies 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 Prospector Partners allocated the biggest weight to Maxim Integrated Products Inc. (NASDAQ:MXIM), around 2.06% of its 13F portfolio. L2 Asset Management is also relatively very bullish on the stock, setting aside 1.65 percent of its 13F equity portfolio to MXIM.

As one would reasonably expect, key hedge funds were leading the bulls’ herd. Balyasny Asset Management, managed by Dmitry Balyasny, initiated the biggest position in Maxim Integrated Products Inc. (NASDAQ:MXIM). Balyasny Asset Management had $28.9 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $22.5 million position during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Mikal Patel’s Oribel Capital Management, and Greg Eisner’s Engineers Gate Manager.

Let’s now review hedge fund activity in other stocks similar to Maxim Integrated Products Inc. (NASDAQ:MXIM). We will take a look at Laboratory Corp. of America Holdings (NYSE:LH), Amcor plc (NYSE:AMCR), Pioneer Natural Resources Company (NYSE:PXD), Bilibili Inc. (NASDAQ:BILI), Hess Corporation (NYSE:HES), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), and Arista Networks Inc (NYSE:ANET). This group of stocks’ market valuations are closest to MXIM’s market valuation.

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As you can see these stocks had an average of 36.3 hedge funds with bullish positions and the average amount invested in these stocks was $822 million. That figure was $324 million in MXIM’s case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Amcor plc (NYSE:AMCR) is the least popular one with only 16 bullish hedge fund positions. Maxim Integrated Products Inc. (NASDAQ:MXIM) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MXIM is 53.6. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. A small number of hedge funds were also right about betting on MXIM as the stock returned 15.7% since the end of the second quarter (through 10/30) and outperformed the market by an even larger margin.

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