BofA Highlights The Most 'Underowned' Semi Stocks

Most traders know that there are a lot more factors impacting share price than company fundamentals. One of the metrics that can drive stock price is how much buying and selling is being done by institutional investors, including hedge funds.

Semi Sector Analysis

Bank of America Merrill Lynch analyst Vivek Arya recently evaluated how hedge fund ownership of major semiconductor stocks has changed over the past three months. Arya specifically looked for semiconductor stocks that are underowned or have a low relative weighting. The lower the ownership and the weighting, the more bullish the potential setup.

Overall, hedge funds have a slightly overweight position in semis at 1.08x the S&P 500’s relative weighting. Still, this exposure is down 17 percent year-to-date and well below the peak 1.46 weighting in March 2017.

By The Numbers

Here’s a stock-by-stock breakdown of active fund ownership data:

• Analog Devices, Inc. ADI is owned by 16.8 percent of funds, up 1.7 percent with a 1.33x weighting.
• NVIDIA Corporation NVDA is owned by 27.9 percent of funds, up 1.7 percent with a 0.86x weighting.
• Intel Corporation INTC is owned by 31.3 percent of funds, up 3.6 percent with a 0.87x weighting.
• Advanced Micro Devices, Inc. AMD is owned by 1.4 percent of funds, down 1.3 percent with a 0.04x weighting.
• Lam Research Corporation LRCX is owned by 15.9 percent of funds, up 0.1 percent with a 0.30x weighting.
• Broadcom Inc AVGO is owned by 32.7 percent of funds, down 0.2 percent with a 2.24x weighting.

Top Pick

Overall, Arya is sticking with Nvidia as his top stock pick.

“NVDA remains our top sector pick and ownership levels are still well below the 40-percent-plus levels of some large-cap semi and tech peers,” the analyst said. 

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