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Sigma Designs Inc (SIGM): Hedge Funds and Insiders Are Bearish, What Should You Do?

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Sigma Designs Inc (NASDAQ:SIGM) has seen a decrease in support from the world’s most elite money managers lately.

According to most market participants, hedge funds are perceived as worthless, old financial tools of yesteryear. While there are more than 8000 funds with their doors open today, we at Insider Monkey choose to focus on the elite of this club, around 450 funds. It is estimated that this group has its hands on the majority of the hedge fund industry’s total capital, and by paying attention to their top picks, we have figured out a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outstripped 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 trumped the S&P 500 index by 24 percentage points in 7 months (see all of our picks from August).

Chuck Royce

Just as beneficial, optimistic insider trading activity is a second way to break down the marketplace. There are plenty of reasons for an insider to cut shares of his or her company, but only one, very clear reason why they would initiate a purchase. Various academic studies have demonstrated the market-beating potential of this tactic if piggybackers know what to do (learn more here).

With all of this in mind, we’re going to take a look at the recent action encompassing Sigma Designs Inc (NASDAQ:SIGM).

How have hedgies been trading Sigma Designs Inc (NASDAQ:SIGM)?

At the end of the fourth quarter, a total of 7 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly.

When looking at the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the largest position in Sigma Designs Inc (NASDAQ:SIGM). Royce & Associates has a $18.3 million position in the stock, comprising 0.1% of its 13F portfolio. Sitting at the No. 2 spot is Ryan Schaper of Point Lobos Capital, with a $2.4 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining hedgies that hold long positions include John W. Rogers’s Ariel Investments, Jim Simons’s Renaissance Technologies and Thomas E. Claugus’s GMT Capital.

Judging by the fact that Sigma Designs Inc (NASDAQ:SIGM) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of money managers who sold off their full holdings last quarter. It’s worth mentioning that Israel Englander’s Millennium Management cut the biggest stake of the “upper crust” of funds we watch, valued at an estimated $0.4 million in stock. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

What do corporate executives and insiders think about Sigma Designs Inc (NASDAQ:SIGM)?

Insider purchases made by high-level executives is most useful when the company in question has seen transactions within the past half-year. Over the latest 180-day time frame, Sigma Designs Inc (NASDAQ:SIGM) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Sigma Designs Inc (NASDAQ:SIGM). These stocks are MaxLinear, Inc. (NYSE:MXL), Ultra Clean Holdings Inc (NASDAQ:UCTT), Rubicon Technology, Inc. (NASDAQ:RBCN), Canadian Solar Inc. (NASDAQ:CSIQ), and Actions Semiconductor Co., Ltd. (ADR) (NASDAQ:ACTS). This group of stocks are in the semiconductor – specialized industry and their market caps resemble SIGM’s market cap.

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