Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Super Micro Computer, Inc. (NASDAQ:SMCI).
Is SMCI a good stock to buy? Super Micro Computer, Inc. (NASDAQ:SMCI) was in 21 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 24. SMCI investors should be aware of an increase in enthusiasm from smart money of late. There were 20 hedge funds in our database with SMCI positions at the end of the second quarter. Our calculations also showed that SMCI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. With all of this in mind we’re going to view the key hedge fund action surrounding Super Micro Computer, Inc. (NASDAQ:SMCI).
Howard Marks of Oaktree Capital
Do Hedge Funds Think SMCI Is A Good Stock To Buy Now?
At third quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in SMCI over the last 25 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in Super Micro Computer, Inc. (NASDAQ:SMCI) was held by Oaktree Capital Management, which reported holding $78.1 million worth of stock at the end of September. It was followed by Hawk Ridge Management with a $67.4 million position. Other investors bullish on the company included Madison Avenue Partners, Empyrean Capital Partners, and Pzena Investment Management. In terms of the portfolio weights assigned to each position Madison Avenue Partners allocated the biggest weight to Super Micro Computer, Inc. (NASDAQ:SMCI), around 13.49% of its 13F portfolio. Hawk Ridge Management is also relatively very bullish on the stock, dishing out 4.33 percent of its 13F equity portfolio to SMCI.
With a general bullishness amongst the heavyweights, key money managers have jumped into Super Micro Computer, Inc. (NASDAQ:SMCI) headfirst. Zebra Capital Management, managed by Roger Ibbotson, established the most valuable position in Super Micro Computer, Inc. (NASDAQ:SMCI). Zebra Capital Management had $1.3 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP also initiated a $1.1 million position during the quarter. The other funds with brand new SMCI positions are Israel Englander’s Millennium Management and Bruce Kovner’s Caxton Associates LP.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Super Micro Computer, Inc. (NASDAQ:SMCI) but similarly valued. We will take a look at Micro Focus Intl PLC (NYSE:MFGP), Sema4 Holdings Corp. (NASDAQ:SMFR), Argo Group International Holdings, Ltd. (NYSE:ARGO), Quanterix Corporation (NASDAQ:QTRX), Clean Energy Fuels Corp (NASDAQ:CLNE), Granite Construction Incorporated (NYSE:GVA), and Microvision, Inc. (NASDAQ:MVIS). All of these stocks’ market caps are closest to SMCI’s market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position MFGP,5,9796,-2 SMFR,34,483747,34 ARGO,14,238823,2 QTRX,19,251379,-1 CLNE,14,44764,-3 GVA,15,27341,1 MVIS,6,10235,-5 Average,15.3,152298,3.7 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.3 hedge funds with bullish positions and the average amount invested in these stocks was $152 million. That figure was $359 million in SMCI’s case. Sema4 Holdings Corp. (NASDAQ:SMFR) is the most popular stock in this table. On the other hand Micro Focus Intl PLC (NYSE:MFGP) is the least popular one with only 5 bullish hedge fund positions. Super Micro Computer, Inc. (NASDAQ:SMCI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SMCI is 59.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on SMCI as the stock returned 20.2% since the end of Q3 (through 12/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.