Is MACOM Technology Solutions Holdings Inc (MTSI) A Good Stock To Buy?

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We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) based on that data.

MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) investors should pay attention to a decrease in support from the world’s most elite money managers of late. Our calculations also showed that MTSI isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

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David E. Shaw of D.E. Shaw

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology’s influence will go beyond online payments. So, we are checking out this futurist’s moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the fresh hedge fund action surrounding MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI).

How have hedgies been trading MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI)?

Heading into the second quarter of 2020, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MTSI over the last 18 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

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Is MTSI A Good Stock To Buy?

More specifically, Yiheng Capital was the largest shareholder of MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), with a stake worth $62.5 million reported as of the end of September. Trailing Yiheng Capital was D E Shaw, which amassed a stake valued at $50.3 million. Royce & Associates, Millennium Management, and Citadel Investment Group 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 Yiheng Capital allocated the biggest weight to MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI), around 4.91% of its 13F portfolio. Cinctive Capital Management is also relatively very bullish on the stock, dishing out 0.77 percent of its 13F equity portfolio to MTSI.

Because MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of hedgies that slashed their positions entirely heading into Q4. Interestingly, Mark Coe’s Intrinsic Edge Capital dumped the biggest investment of the “upper crust” of funds tracked by Insider Monkey, totaling close to $8.8 million in stock, and Frank Slattery’s Symmetry Peak Management was right behind this move, as the fund sold off about $0.9 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 2 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI). These stocks are PRA Group, Inc. (NASDAQ:PRAA), Twist Bioscience Corporation (NASDAQ:TWST), Knowles Corp (NYSE:KN), and Northwest Bancshares, Inc. (NASDAQ:NWBI). This group of stocks’ market valuations are similar to MTSI’s market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRAA,14,51314,2 TWST,16,216481,1 KN,20,205594,-9 NWBI,14,20443,-5 Average,16,123458,-2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $153 million in MTSI’s case. Knowles Corp (NYSE:KN) is the most popular stock in this table. On the other hand PRA Group, Inc. (NASDAQ:PRAA) is the least popular one with only 14 bullish hedge fund positions. MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) is not the least popular stock in this group but hedge fund interest is still below average. 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 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on MTSI as the stock returned 81.3% during the second quarter 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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