Were Hedge Funds Right About Crowding Into Qorvo Inc (QRVO)?

Abigail Fisher

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 Qorvo Inc (NASDAQ:QRVO).

Is Qorvo Inc (NASDAQ:QRVO) a buy, sell, or hold? Prominent investors were getting more bullish. The number of long hedge fund positions improved by 12 recently. Qorvo Inc (NASDAQ:QRVO) was in 51 hedge funds' portfolios at the end of June. The all time high for this statistics is 45. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that QRVO 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 39 hedge funds in our database with QRVO positions at the end of the first quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

BAUPOST GROUP Seth Klarman
BAUPOST GROUP Seth Klarman

Seth Klarman of Baupost Group

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we're going to go over the latest hedge fund action regarding Qorvo Inc (NASDAQ:QRVO).

How have hedgies been trading Qorvo Inc (NASDAQ:QRVO)?

Heading into the third quarter of 2020, a total of 51 of the hedge funds tracked by Insider Monkey were long this stock, a change of 31% from one quarter earlier. On the other hand, there were a total of 28 hedge funds with a bullish position in QRVO a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Baupost Group, managed by Seth Klarman, holds the most valuable position in Qorvo Inc (NASDAQ:QRVO). Baupost Group has a $338.8 million position in the stock, comprising 4.2% of its 13F portfolio. Sitting at the No. 2 spot is Cliff Asness of AQR Capital Management, with a $203.4 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other members of the smart money with similar optimism comprise David Cohen and Harold Levy's Iridian Asset Management, Ken Fisher's Fisher Asset Management and Ken Griffin's Citadel Investment Group. In terms of the portfolio weights assigned to each position Shelter Haven Capital Management allocated the biggest weight to Qorvo Inc (NASDAQ:QRVO), around 7.73% of its 13F portfolio. Bronson Point Partners is also relatively very bullish on the stock, dishing out 5.44 percent of its 13F equity portfolio to QRVO.

As one would reasonably expect, some big names were breaking ground themselves. Jericho Capital Asset Management, managed by Josh Resnick, assembled the most outsized position in Qorvo Inc (NASDAQ:QRVO). Jericho Capital Asset Management had $73.3 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also made a $53.7 million investment in the stock during the quarter. The other funds with brand new QRVO positions are Michael Rockefeller and KarláKroeker's Woodline Partners, John Hurley's Cavalry Asset Management, and Jerry Kochanski's Shelter Haven Capital Management.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Qorvo Inc (NASDAQ:QRVO) but similarly valued. These stocks are Etsy Inc (NASDAQ:ETSY), Genuine Parts Company (NYSE:GPC), Sarepta Therapeutics Inc (NASDAQ:SRPT), Hewlett Packard Enterprise Company (NYSE:HPE), Grifols SA (NASDAQ:GRFS), Nucor Corporation (NYSE:NUE), and FactSet Research Systems Inc. (NYSE:FDS). This group of stocks' market values are closest to QRVO's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ETSY,43,1727421,5 GPC,20,144284,-2 SRPT,39,1148135,6 HPE,31,693633,2 GRFS,21,583023,-2 NUE,26,115702,0 FDS,21,200608,0 Average,28.7,658972,1.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.7 hedge funds with bullish positions and the average amount invested in these stocks was $659 million. That figure was $1609 million in QRVO's case. Etsy Inc (NASDAQ:ETSY) is the most popular stock in this table. On the other hand Genuine Parts Company (NYSE:GPC) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Qorvo Inc (NASDAQ:QRVO) is more popular among hedge funds. Our overall hedge fund sentiment score for QRVO is 90. 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 returned 30% in 2020 through October 23rd but still managed to beat the market by 21 percentage points. Hedge funds were also right about betting on QRVO as the stock returned 22.8% since the end of June (through 10/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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