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NII Holdings, Inc. (NASDAQ:NIHD), UTStarcom Holdings Corp (NASDAQ:UTSI): Leap Wireless International, Inc. (NASDAQ:LEAP): Are Hedge Funds Right About This Stock?

Is Leap Wireless International, Inc. (NASDAQ:LEAP) a buy, sell, or hold? Money managers are becoming less hopeful. The number of long hedge fund bets stayed the same which is a slightly negative development in our experience

Mark Rachesky - MHR Fund Management Reported 29.97% Stake in $LEAPTo the average investor, there are dozens of gauges market participants can use to monitor the equity markets. A pair of the most useful are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the elite investment managers can outclass the broader indices by a significant margin (see just how much).

Equally as beneficial, bullish insider trading sentiment is another way to break down the marketplace. Just as you’d expect, there are a number of motivations for a bullish insider to drop shares of his or her company, but only one, very clear reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the impressive potential of this method if you understand where to look (learn more here).

Now, it’s important to take a glance at the key action surrounding Leap Wireless International, Inc. (NASDAQ:LEAP).

Hedge fund activity in Leap Wireless International, Inc. (NASDAQ:LEAP)

At the end of the fourth quarter, a total of 15 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings substantially.

According to our comprehensive database, John Paulson’s Paulson & Co had the largest position in Leap Wireless International, Inc. (NASDAQ:LEAP), worth close to $52 million, comprising 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is Pentwater Capital Management, managed by Matthew Halbower, which held a $33 million position; 0.2% of its 13F portfolio is allocated to the company. Some other hedgies that are bullish include Rishi Bajaj, Toby Symonds, and Steve Tesoriere’s Altai Capital, Rob Citrone’s Discovery Capital Management and Jeffrey Altman’s Owl Creek Asset Management.

Due to the fact that Leap Wireless International, Inc. (NASDAQ:LEAP) has experienced declining sentiment from hedge fund managers, it’s safe to say that there were a few fund managers that decided to sell off their positions entirely in Q4. At the top of the heap, Mark Rachesky’s MHR Fund Management sold off the biggest stake of the “upper crust” of funds we watch, worth an estimated $160 million in stock.. Bruce Kovner’s fund, Caxton Associates LP, also dumped its stock, about $14 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

How are insiders trading Leap Wireless International, Inc. (NASDAQ:LEAP)?

Insider purchases made by high-level executives is most useful when the primary stock in question has experienced transactions within the past 180 days. Over the last 180-day time period, Leap Wireless International, Inc. (NASDAQ:LEAP) has seen zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Leap Wireless International, Inc. (NASDAQ:LEAP). These stocks are Maxcom Telecomunic S.A.B. de C.V. (ADR) (NYSE:MXT), USA Mobility Inc (NASDAQ:USMO), NII Holdings, Inc. (NASDAQ:NIHD), UTStarcom Holdings Corp (NASDAQ:UTSI), and Pendrell Corporation – Class A (NASDAQ:PCO). This group of stocks are in the wireless communications industry and their market caps are closest to LEAP’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Maxcom Telecomunic S.A.B. de C.V. (ADR) (NYSE:MXT) 1 0 0
USA Mobility Inc (NASDAQ:USMO) 9 1 1
NII Holdings, Inc. (NASDAQ:NIHD) 18 0 0
UTStarcom Holdings Corp (NASDAQ:UTSI) 9 0 0
Pendrell Corporation – Class A (NASDAQ:PCO) 10 0 1

With the returns shown by our tactics, retail investors should always watch hedge fund and insider trading activity, and Leap Wireless International, Inc. (NASDAQ:LEAP) shareholders fit into this picture quite nicely.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

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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