Are Hedge Funds Betting On A Microsoft Corporation (MSFT) – Advanced Micro Devices, Inc. (AMD) Merger?

On the other hand, hedge fund sentiment is positive for Advanced Micro Devices, Inc. (NASDAQ:AMD), with 15 hedge fund investors holding $36.33 million of the company’s shares on March 31 compared to holdings of $28.34 million from 12 investors on December 31. David E. Shaw’s D. E. Shaw is among the primary stakeholders of the chipmaker, investing $13.00 million in the company through ownership of 4.85 million shares. Insiders have not made any open market sales or purchases over the past six months in either company. Some of the common hedge fund investors with positions in both Microsoft Corporation (NASDAQ:MSFT) and Advanced Micro Devices, Inc. (NASDAQ:AMD) include D E Shaw, Cliff Asness’ AQR Capital Management, and Ken Griffin’s Citadel Investment Group.

A potential merger between Microsoft Corporation (NASDAQ:MSFT) and Advanced Micro Devices, Inc. (NASDAQ:AMD) may or may not happen in the near future but it is clear from the overall hedge fund involvement that they weren’t betting large amounts on AMD, despite growing slightly more bullish. In fact, hedge funds were 70% underweight AMD, which suggests they weren’t predicting any such merger and may not be counting on one even now despite the latest rumors.

Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 135% over the last 34 months, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

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