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Do Hedge Funds and Insiders Love EZchip Semiconductor Ltd. (EZCH)?

Is EZchip Semiconductor Ltd. (NASDAQ:EZCH) the right investment to pursue these days? Money managers are in a bullish mood. The number of long hedge fund bets moved up by 1 recently.

To most market participants, hedge funds are seen as underperforming, outdated financial vehicles of yesteryear. While there are over 8000 funds in operation at the moment, we at Insider Monkey look at the crème de la crème of this group, about 450 funds. Most estimates calculate that this group has its hands on most of the smart money’s total asset base, and by watching their top investments, we have figured out a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

Equally as integral, optimistic insider trading sentiment is a second way to parse down the investments you’re interested in. As the old adage goes: there are a number of stimuli for an insider to sell shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the impressive potential of this strategy if you know where to look (learn more here).

With these “truths” under our belt, it’s important to take a look at the latest action surrounding EZchip Semiconductor Ltd. (NASDAQ:EZCH).

How are hedge funds trading EZchip Semiconductor Ltd. (NASDAQ:EZCH)?

Heading into 2013, a total of 7 of the hedge funds we track held long positions in this stock, a change of 17% from the third quarter. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully.

EZchip Semiconductor Ltd. (NASDAQ:EZCH)When looking at the hedgies we track, Columbus Circle Investors, managed by Donald Chiboucis, holds the most valuable position in EZchip Semiconductor Ltd. (NASDAQ:EZCH). Columbus Circle Investors has a $33.3 million position in the stock, comprising 0.3% of its 13F portfolio. Coming in second is Ryan Frick and Oliver Evans of Dorsal Capital Management, with a $29.8 million position; the fund has 3.9% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Jeffrey Vinik’s Vinik Asset Management, D. E. Shaw’s D E Shaw and Joseph A. Jolson’s Harvest Capital Strategies.

Consequently, specific money managers have been driving this bullishness. Vinik Asset Management, managed by Jeffrey Vinik, initiated the most valuable position in EZchip Semiconductor Ltd. (NASDAQ:EZCH). Vinik Asset Management had 8 million invested in the company at the end of the quarter.

How have insiders been trading EZchip Semiconductor Ltd. (NASDAQ:EZCH)?

Insider buying is particularly usable when the primary stock in question has experienced transactions within the past 180 days. Over the last 180-day time frame, EZchip Semiconductor Ltd. (NASDAQ:EZCH) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to EZchip Semiconductor Ltd. (NASDAQ:EZCH). These stocks are Cabot Microelectronics Corporation (NASDAQ:CCMP), Amkor Technology, Inc. (NASDAQ:AMKR), Micrel, Incorporated (NASDAQ:MCRL), OmniVision Technologies, Inc. (NASDAQ:OVTI), and Aeroflex Holding Corp. (NYSE:ARX). This group of stocks belong to the semiconductor – integrated circuits industry and their market caps are similar to EZCH’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Cabot Microelectronics Corporation (NASDAQ:CCMP) 5 0 13
Amkor Technology, Inc. (NASDAQ:AMKR) 11 0 0
Micrel, Incorporated (NASDAQ:MCRL) 6 2 1
OmniVision Technologies, Inc. (NASDAQ:OVTI) 17 0 2
Aeroflex Holding Corp. (NYSE:ARX) 7 2 0

With the returns shown by Insider Monkey’s strategies, retail investors must always pay attention to hedge fund and insider trading sentiment, and EZchip Semiconductor Ltd. (NASDAQ:EZCH) is an important part of this process.

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