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 KLA Corporation (NASDAQ:KLAC).
Is KLAC stock a buy? The best stock pickers were in a bullish mood. The number of bullish hedge fund bets rose by 3 in recent months. KLA Corporation (NASDAQ:KLAC) was in 36 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 46. Our calculations also showed that KLAC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 124 percentage points since March 2017 (see the details here).
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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. With all of this in mind we’re going to view the key hedge fund action encompassing KLA Corporation (NASDAQ:KLAC).
Do Hedge Funds Think KLAC Is A Good Stock To Buy Now?
At the end of December, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in KLAC over the last 22 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in KLA Corporation (NASDAQ:KLAC) was held by Alkeon Capital Management, which reported holding $398.7 million worth of stock at the end of December. It was followed by Arrowstreet Capital with a $205.2 million position. Other investors bullish on the company included AQR Capital Management, Renaissance Technologies, and Adage Capital Management. In terms of the portfolio weights assigned to each position L2 Asset Management allocated the biggest weight to KLA Corporation (NASDAQ:KLAC), around 1.64% of its 13F portfolio. Hosking Partners is also relatively very bullish on the stock, earmarking 0.71 percent of its 13F equity portfolio to KLAC.
With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. TwinBeech Capital, managed by Jinghua Yan, created the most outsized position in KLA Corporation (NASDAQ:KLAC). TwinBeech Capital had $1.6 million invested in the company at the end of the quarter. Greg Poole’s Echo Street Capital Management also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Minhua Zhang’s Weld Capital Management, Michael Gelband’s ExodusPoint Capital, and Matthew Tewksbury’s Stevens Capital Management.
Let’s go over hedge fund activity in other stocks similar to KLA Corporation (NASDAQ:KLAC). These stocks are Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), L3Harris Technologies, Inc. (NASDAQ:LHX), Synopsys, Inc. (NASDAQ:SNPS), Amphenol Corporation (NYSE:APH), Digital Realty Trust, Inc. (NYSE:DLR), Chipotle Mexican Grill, Inc. (NYSE:CMG), and BCE Inc. (NYSE:BCE). This group of stocks’ market caps resemble KLAC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ERIC | 20 | 210745 | -3 |
| LHX | 37 | 890624 | -5 |
| SNPS | 40 | 1685180 | 8 |
| APH | 41 | 1049030 | -8 |
| DLR | 23 | 316827 | -2 |
| CMG | 35 | 3374121 | -17 |
| BCE | 13 | 90782 | 3 |
| Average | 29.9 | 1088187 | -3.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $1088 million. That figure was $926 million in KLAC’s case. Amphenol Corporation (NYSE:APH) is the most popular stock in this table. On the other hand BCE Inc. (NYSE:BCE) is the least popular one with only 13 bullish hedge fund positions. KLA Corporation (NASDAQ:KLAC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for KLAC is 72.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 7.9% in 2021 through April 1st and still beat the market by 0.4 percentage points. Hedge funds were also right about betting on KLAC as the stock returned 34.5% since the end of Q4 (through 4/1) 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.
