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Hedge Funds Are Buying Magnachip Semiconductor Corp (MX): JA Solar Holdings Co., Ltd. (ADR) (JASO), Lattice Semiconductor (LSCC)

Magnachip Semiconductor Corp (NYSE:MX) was in 15 hedge funds’ portfolio at the end of December. MX has experienced an increase in enthusiasm from smart money lately. There were 13 hedge funds in our database with MX holdings at the end of the previous quarter.

If you’d ask most stock holders, hedge funds are perceived as slow, old financial tools of years past. While there are greater than 8000 funds trading at present, we hone in on the moguls of this group, about 450 funds. It is widely believed that this group has its hands on most of all hedge funds’ total asset base, and by keeping an eye on their highest performing stock picks, we have identified a few investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year 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 outpaced the S&P 500 index by 25 percentage points in 6.5 month (see all of our picks from August).

Equally as beneficial, positive insider trading sentiment is a second way to parse down the investments you’re interested in. Just as you’d expect, there are a variety of incentives for a corporate insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the useful potential of this tactic if you know where to look (learn more here).

Consequently, we’re going to take a peek at the recent action regarding Magnachip Semiconductor Corp (NYSE:MX).

How are hedge funds trading Magnachip Semiconductor Corp (NYSE:MX)?

At year’s end, a total of 15 of the hedge funds we track were long in this stock, a change of 15% from the previous quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably.

Of the funds we track, Avenue Capital, managed by Marc Lasry, holds the most valuable position in Magnachip Semiconductor Corp (NYSE:MX). Avenue Capital has a $211 million position in the stock, comprising 41.1% of its 13F portfolio. Coming in second is Harvest Capital Strategies, managed by Joseph A. Jolson, which held a $17 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Some other hedgies that hold long positions include Jim Simons’s Renaissance Technologies, D. E. Shaw’s D E Shaw and Robert B. Gillam’s McKinley Capital Management.

As aggregate interest increased, key money managers were breaking ground themselves. Kingdon Capital, managed by Mark Kingdon, created the most outsized position in Magnachip Semiconductor Corp (NYSE:MX). Kingdon Capital had 4 million invested in the company at the end of the quarter. Steven Cohen’s SAC Capital Advisors also made a $1 million investment in the stock during the quarter. The other funds with brand new MX positions are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Neil Chriss’s Hutchin Hill Capital, and Mark A. Nordlicht’s Platinum Management.

How are insiders trading Magnachip Semiconductor Corp (NYSE:MX)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in question has seen transactions within the past half-year. Over the last 180-day time frame, Magnachip Semiconductor Corp (NYSE:MX) has experienced zero unique insiders purchasing, and 2 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 Magnachip Semiconductor Corp (NYSE:MX). These stocks are JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO), Lattice Semiconductor (NASDAQ:LSCC), Monolithic Power Systems, Inc. (NASDAQ:MPWR), Himax Technologies, Inc. (ADR) (NASDAQ:HIMX), and GT Advanced Technologies Inc (NASDAQ:GTAT). This group of stocks are the members of the semiconductor – specialized industry and their market caps resemble MX’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) 3 0 0
Lattice Semiconductor (NASDAQ:LSCC) 13 0 1
Monolithic Power Systems, Inc. (NASDAQ:MPWR) 7 0 11
Himax Technologies, Inc. (ADR) (NASDAQ:HIMX) 6 0 0
GT Advanced Technologies Inc (NASDAQ:GTAT) 16 0 0

With the results demonstrated by our research, everyday investors should always watch hedge fund and insider trading sentiment, and Magnachip Semiconductor Corp (NYSE:MX) shareholders fit into this picture quite nicely.

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Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.

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