Hedge Funds Are Warming Up To Power Integrations Inc (POWI)

·6 min read

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Power Integrations Inc (NASDAQ:POWI) in this article.

Power Integrations Inc (NASDAQ:POWI) has experienced an increase in activity from the world's largest hedge funds recently. Power Integrations Inc (NASDAQ:POWI) was in 21 hedge funds' portfolios at the end of June. The all time high for this statistic is 21. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. There were 18 hedge funds in our database with POWI positions at the end of the first quarter. Our calculations also showed that POWI isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Ken Griffin of Citadel Investment Group

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. 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 homepage. Keeping this in mind let's review the recent hedge fund action surrounding Power Integrations Inc (NASDAQ:POWI).

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

At second quarter's end, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the first quarter of 2020. By comparison, 17 hedge funds held shares or bullish call options in POWI a year ago. With hedgies' capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Is POWI A Good Stock To Buy?
Is POWI A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, holds the number one position in Power Integrations Inc (NASDAQ:POWI). Polar Capital has a $61.1 million position in the stock, comprising 0.3% of its 13F portfolio. The second most bullish fund manager is Cavalry Asset Management, led by John Hurley, holding a $17.7 million position; 1.9% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism encompass Israel Englander's Millennium Management, Renaissance Technologies and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Cavalry Asset Management allocated the biggest weight to Power Integrations Inc (NASDAQ:POWI), around 1.92% of its 13F portfolio. Polar Capital is also relatively very bullish on the stock, dishing out 0.27 percent of its 13F equity portfolio to POWI.

Consequently, some big names have jumped into Power Integrations Inc (NASDAQ:POWI) headfirst. Tudor Investment Corp, managed by Paul Tudor Jones, established the most outsized position in Power Integrations Inc (NASDAQ:POWI). Tudor Investment Corp had $2.3 million invested in the company at the end of the quarter. Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital also initiated a $2 million position during the quarter. The following funds were also among the new POWI investors: Donald Sussman's Paloma Partners, Alec Litowitz and Ross Laser's Magnetar Capital, and Bruce Kovner's Caxton Associates LP.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Power Integrations Inc (NASDAQ:POWI) but similarly valued. We will take a look at Revolve Group, Inc. (NYSE:RVLV), Spirit AeroSystems Holdings, Inc. (NYSE:SPR), Red Rock Resorts, Inc. (NASDAQ:RRR), Atotech Limited (NYSE:ATC), VIZIO Holding Corp. (NYSE:VZIO), Antero Midstream Corp (NYSE:AM), and Neogen Corporation (NASDAQ:NEOG). All of these stocks' market caps match POWI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RVLV,22,211498,-7 SPR,35,853789,-9 RRR,26,658230,-2 ATC,23,82518,6 VZIO,19,128239,0 AM,16,106977,-1 NEOG,12,37911,2 Average,21.9,297023,-1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.9 hedge funds with bullish positions and the average amount invested in these stocks was $297 million. That figure was $139 million in POWI's case. Spirit AeroSystems Holdings, Inc. (NYSE:SPR) is the most popular stock in this table. On the other hand Neogen Corporation (NASDAQ:NEOG) is the least popular one with only 12 bullish hedge fund positions. Power Integrations Inc (NASDAQ:POWI) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for POWI is 57.6. 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 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 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on POWI as the stock returned 24.3% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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

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