Cavium Inc (NASDAQ:CAVM) investors should pay attention to an increase in activity from the world’s largest hedge funds lately.
In the eyes of most shareholders, hedge funds are perceived as worthless, outdated financial tools of yesteryear. While there are greater than 8000 funds with their doors open today, we at Insider Monkey hone in on the elite of this club, close to 450 funds. It is widely believed that this group has its hands on most of the smart money’s total asset base, and by watching their highest performing equity investments, we have spotted a number of investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).
Equally as integral, positive insider trading activity is another way to parse down the investments you’re interested in. Obviously, there are many stimuli for a bullish insider to sell shares of his or her company, but only one, very clear reason why they would behave bullishly. Various academic studies have demonstrated the market-beating potential of this tactic if shareholders understand where to look (learn more here).
Now, let’s take a look at the latest action regarding Cavium Inc (NASDAQ:CAVM).
Hedge fund activity in Cavium Inc (NASDAQ:CAVM)
At the end of the fourth quarter, a total of 18 of the hedge funds we track were bullish in this stock, a change of 29% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes significantly.
When looking at the hedgies we track, Ryan Frick and Oliver Evans’s Dorsal Capital Management had the biggest position in Cavium Inc (NASDAQ:CAVM), worth close to $31 million, accounting for 4.1% of its total 13F portfolio. The second largest stake is held by Steven Cohen of SAC Capital Advisors, with a $23 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedgies that are bullish include Donald Chiboucis’s Columbus Circle Investors, John Hurley’s Cavalry Asset Management and Seymour Sy Kaufman and Michael Stark’s Crosslink Capital.
As industrywide interest jumped, some big names were breaking ground themselves. Columbus Circle Investors, managed by Donald Chiboucis, initiated the largest position in Cavium Inc (NASDAQ:CAVM). Columbus Circle Investors had 19 million invested in the company at the end of the quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital also initiated a $10 million position during the quarter. The other funds with new positions in the stock are SAC Subsidiary’s Sigma Capital Management, Israel Englander’s Millennium Management, and William Harnisch’s Peconic Partners LLC.
What have insiders been doing with Cavium Inc (NASDAQ:CAVM)?
Insider purchases made by high-level executives is best served when the company in question has experienced transactions within the past six months. Over the latest six-month time period, Cavium Inc (NASDAQ:CAVM) has experienced zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).
With the results exhibited by the aforementioned studies, retail investors should always pay attention to hedge fund and insider trading sentiment, and Cavium Inc (NASDAQ:CAVM) is an important part of this process.
Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.