PLX Technology, Inc. (NASDAQ:PLXT) shareholders have witnessed a decrease in hedge fund sentiment recently.
If you'd ask most market participants, hedge funds are assumed to be unimportant, outdated financial tools of yesteryear. While there are greater than 8000 funds in operation today, we hone in on the aristocrats of this club, around 450 funds. It is estimated that this group has its hands on most of the smart money's total capital, and by tracking their top picks, we have deciphered a number of investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a 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 outperformed the S&P 500 index by 23.3 percentage points in 8 months (see the details here).
Equally as important, positive insider trading activity is a second way to parse down the stock market universe. Just as you'd expect, there are a variety of reasons for an insider to drop 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 market-beating potential of this strategy if you understand what to do (learn more here).
Keeping this in mind, let's take a gander at the recent action surrounding PLX Technology, Inc. (NASDAQ:PLXT).
At Q1's end, a total of 11 of the hedge funds we track were bullish in this stock, a change of -15% from the first quarter. With hedge funds' sentiment swirling, there exists an "upper tier" of notable hedge fund managers who were boosting their holdings substantially.
When looking at the hedgies we track, Cliff Asness's AQR Capital Management had the most valuable position in PLX Technology, Inc. (NASDAQ:PLXT), worth close to $15.6 million, accounting for 0.1% of its total 13F portfolio. The second largest stake is held by Michael Price of MFP Investors, with a $3.4 million position; 0.4% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Peter S. Park's Park West Asset Management, Kelly Cardwell's Central Square Management and D. E. Shaw's D E Shaw.
Since PLX Technology, Inc. (NASDAQ:PLXT) has faced bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few money managers that decided to sell off their entire stakes last quarter. Interestingly, Alec Litowitz and Ross Laser's Magnetar Capital cut the biggest investment of the 450+ funds we monitor, comprising an estimated $1.5 million in stock., and Andy Redleaf of Whitebox Advisors was right behind this move, as the fund sold off about $0.3 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds last quarter.
Insider buying is most useful when the company we're looking at has seen transactions within the past 180 days. Over the latest half-year time period, PLX Technology, Inc. (NASDAQ:PLXT) has seen zero unique insiders buying, and 1 insider sales (see the details of insider trades here).
With the results demonstrated by our tactics, retail investors must always watch hedge fund and insider trading activity, and PLX Technology, Inc. (NASDAQ:PLXT) is an important part of this process.