At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Skyworks Solutions Inc (NASDAQ:SWKS) at the end of the second quarter and determine whether the smart money was really smart about this stock.
Skyworks Solutions Inc (NASDAQ:SWKS) has seen an increase in hedge fund interest lately. Skyworks Solutions Inc (NASDAQ:SWKS) was in 49 hedge funds' portfolios at the end of June. The all time high for this statistics is 44. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 29 hedge funds in our database with SWKS holdings at the end of March. Our calculations also showed that SWKS 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).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Peter Rathjens Arrowstreet Capital 394
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock.. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let's take a look at the recent hedge fund action encompassing Skyworks Solutions Inc (NASDAQ:SWKS).
How have hedgies been trading Skyworks Solutions Inc (NASDAQ:SWKS)?
Heading into the third quarter of 2020, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of 69% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SWKS over the last 20 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 SWKS A Good Stock To Buy?
More specifically, AQR Capital Management was the largest shareholder of Skyworks Solutions Inc (NASDAQ:SWKS), with a stake worth $306.4 million reported as of the end of September. Trailing AQR Capital Management was Platinum Asset Management, which amassed a stake valued at $196.4 million. Point72 Asset Management, Citadel Investment Group, and Tairen 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 Glaxis Capital Management allocated the biggest weight to Skyworks Solutions Inc (NASDAQ:SWKS), around 5.78% of its 13F portfolio. Tairen Capital is also relatively very bullish on the stock, setting aside 5.58 percent of its 13F equity portfolio to SWKS.
As industrywide interest jumped, key hedge funds have jumped into Skyworks Solutions Inc (NASDAQ:SWKS) headfirst. Tairen Capital, managed by Larry Chen and Terry Zhang, established the most outsized position in Skyworks Solutions Inc (NASDAQ:SWKS). Tairen Capital had $74.5 million invested in the company at the end of the quarter. Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital also initiated a $29.6 million position during the quarter. The following funds were also among the new SWKS investors: John Hurley's Cavalry Asset Management, Israel Englander's Millennium Management, and Richard Mashaal's Rima Senvest Management.
Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Skyworks Solutions Inc (NASDAQ:SWKS) but similarly valued. These stocks are Trane Technologies plc (NYSE:TT), TELUS Corporation (NYSE:TU), FleetCor Technologies, Inc. (NYSE:FLT), Aptiv PLC (NYSE:APTV), FirstEnergy Corp. (NYSE:FE), Simon Property Group, Inc (NYSE:SPG), and Canon Inc. (NYSE:CAJ). This group of stocks' market caps resemble SWKS's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TT,40,730073,4 TU,15,194956,0 FLT,53,2212169,2 APTV,43,1158307,10 FE,41,992017,-3 SPG,27,531930,-2 CAJ,9,55132,2 Average,32.6,839226,1.9 [/table]
As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $839 million. That figure was $994 million in SWKS's case. FleetCor Technologies, Inc. (NYSE:FLT) is the most popular stock in this table. On the other hand Canon Inc. (NYSE:CAJ) is the least popular one with only 9 bullish hedge fund positions. Skyworks Solutions Inc (NASDAQ:SWKS) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SWKS is 85.5. 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on SWKS, though not to the same extent, as the stock returned 13.7% since the end of June and outperformed the market as well.
