Is UTStarcom Holdings Corp (NASDAQ:UTSI) an outstanding investment now? Hedge funds are reducing their bets on the stock. The number of long hedge fund bets dropped by 2 lately.
To most shareholders, hedge funds are viewed as slow, old investment tools of the past. While there are over 8000 funds trading today, we choose to focus on the aristocrats of this club, around 450 funds. It is estimated that this group controls most of all hedge funds' total capital, and by monitoring their top picks, we have revealed a number of investment strategies that have historically outstripped Mr. Market. 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 started sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (see the details here).
Equally as important, positive insider trading sentiment is a second way to parse down the financial markets. As the old adage goes: there are lots of motivations for a bullish insider to cut shares of his or her company, but just one, very clear reason why they would initiate a purchase. Various academic studies have demonstrated the impressive potential of this strategy if piggybackers understand where to look (learn more here).
With all of this in mind, we're going to take a gander at the latest action encompassing UTStarcom Holdings Corp (NASDAQ:UTSI).
In preparation for this year, a total of 9 of the hedge funds we track held long positions in this stock, a change of -18% from one quarter earlier. With hedge funds' sentiment swirling, there exists a select group of key hedge fund managers who were increasing their holdings considerably.
Of the funds we track, Shah Capital Management, managed by Himanshu H. Shah, holds the largest position in UTStarcom Holdings Corp (NASDAQ:UTSI). Shah Capital Management has a $22 million position in the stock, comprising 22.7% of its 13F portfolio. Coming in second is Phil Frohlich of Prescott Group Capital Management, with a $6 million position; 0% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism include Chuck Royce's Royce & Associates, Stuart Peterson's Artis Capital Management and Jim Simons's Renaissance Technologies.
Due to the fact that UTStarcom Holdings Corp (NASDAQ:UTSI) has faced declining sentiment from hedge fund managers, it's safe to say that there exists a select few hedge funds that elected to cut their positions entirely in Q4. Intriguingly, Gregory Fraser, Rudolph Kluiber, and Timothy Kroch's GRT Capital Partners said goodbye to the largest stake of the "upper crust" of funds we monitor, worth about $0 million in stock.. Israel Englander's fund, Millennium Management, also said goodbye to its stock, about $0 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 2 funds in Q4.
Bullish insider trading is best served when the company we're looking at has experienced transactions within the past six months. Over the latest 180-day time frame, UTStarcom Holdings Corp (NASDAQ:UTSI) has seen 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 UTStarcom Holdings Corp (NASDAQ:UTSI). These stocks are NTELOS Holdings Corp. (NASDAQ:NTLS), Maxcom Telecomunic S.A.B. de C.V. (ADR) (NYSE:MXT), USA Mobility Inc (NASDAQ:USMO), Leap Wireless International, Inc. (NASDAQ:LEAP), and Pendrell Corporation - Class A (NASDAQ:PCO). This group of stocks are in the wireless communications industry and their market caps resemble UTSI's market cap.