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Should You Avoid NVIDIA Corporation (NVDA)?

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NVIDIA Corporation (NASDAQ:NVDA)NVIDIA Corporation (NASDAQ:NVDA) was in 29 hedge funds’ portfolio at the end of March. NVDA has experienced a decrease in support from the world’s most elite money managers of late. There were 30 hedge funds in our database with NVDA holdings at the end of the previous quarter.

According to most investors, hedge funds are viewed as slow, outdated financial vehicles of yesteryear. While there are greater than 8000 funds in operation at present, we hone in on the leaders of this group, about 450 funds. It is widely believed that this group has its hands on the majority of all hedge funds’ total capital, and by paying attention to their best stock picks, we have unsheathed a number of investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outstripped 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Equally as integral, optimistic insider trading sentiment is another way to parse down the investments you’re interested in. Obviously, there are a number of reasons for an executive to drop shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the valuable potential of this tactic if shareholders understand where to look (learn more here).

With all of this in mind, we’re going to take a glance at the latest action surrounding NVIDIA Corporation (NASDAQ:NVDA).

What does the smart money think about NVIDIA Corporation (NASDAQ:NVDA)?

Heading into Q2, a total of 29 of the hedge funds we track were long in this stock, a change of -3% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes significantly.

According to our comprehensive database, Third Avenue Management, managed by Martin Whitman, holds the largest position in NVIDIA Corporation (NASDAQ:NVDA). Third Avenue Management has a $42.4 million position in the stock, comprising 0.8% of its 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which held a $32.5 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management and Dmitry Balyasny’s Balyasny Asset Management.

Because NVIDIA Corporation (NASDAQ:NVDA) has faced falling interest from the smart money, we can see that there exists a select few hedge funds that elected to cut their entire stakes in Q1. Interestingly, Steven Cohen’s SAC Capital Advisors said goodbye to the largest stake of the 450+ funds we key on, comprising close to $20.9 million in call options, and Matthew Tewksbury of Stevens Capital Management was right behind this move, as the fund dumped about $10.2 million worth. These bearish behaviors are important to note, as total hedge fund interest was cut by 1 funds in Q1.

What have insiders been doing with NVIDIA Corporation (NASDAQ:NVDA)?

Insider purchases made by high-level executives is at its handiest when the primary stock in question has seen transactions within the past six months. Over the latest 180-day time period, NVIDIA Corporation (NASDAQ:NVDA) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to NVIDIA Corporation (NASDAQ:NVDA). These stocks are ARM Holdings plc (ADR) (NASDAQ:ARMH), LSI Corp (NASDAQ:LSI), Altera Corporation (NASDAQ:ALTR), Linear Technology Corporation (NASDAQ:LLTC), and Microchip Technology Inc. (NASDAQ:MCHP). This group of stocks belong to the semiconductor – specialized industry and their market caps are similar to NVDA’s market cap.

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