Is InvenSense Inc (INVN) a Good Stock to Buy?

At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Third Point because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.

One stock that registered a slight increase in hedge fund sentiment last quarter is InvenSense Inc (NYSE:INVN). Among the funds in our database, 15 funds held shares of INVN at the end of September, compared to 14  funds a quarter earlier. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Global Eagle Acquisition Corp (NASDAQ:ENT), Costamare Inc (NYSE:CMRE), and The Marcus Corporation (NYSE:MCS) to gather more data points.

We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.

Keeping this in mind, let’s view the recent action encompassing InvenSense Inc (NYSE:INVN).

What does the smart money think about InvenSense Inc (NYSE:INVN)?

At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 7% from the second quarter of 2016. On the other hand, there were a total of 20 hedge funds with a bullish position in INVN at the beginning of this year. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the number one position in InvenSense Inc (NYSE:INVN), worth close to $7.5 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, one of the biggest hedge funds in the world, which holds a $4.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors with similar optimism include Millennium Management, Renaissance Technologies, and Frank Slattery’s Symmetry Peak Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As aggregate interest increased, specific money managers have been driving this bullishness. Symmetry Peak Management, led by Frank Slattery, initiated the most outsized call position in InvenSense Inc (NYSE:INVN). Symmetry Peak Management had $1.5 million invested in the company at the end of the quarter. Ken Griffin’s Citadel Investment Group also initiated a $0.5 million position during the quarter. The other funds with brand new INVN positions are Matthew Hulsizer’s PEAK6 Capital Management, Glenn Russell Dubin’s Highbridge Capital Management, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as InvenSense Inc (NYSE:INVN) but similarly valued. We will take a look at Global Eagle Acquisition Corp (NASDAQ:ENT), Costamare Inc (NYSE:CMRE), The Marcus Corporation (NYSE:MCS), and National Bank Holdings Corp (NYSE:NBHC). This group of stocks’ market valuations are closest to INVN’s market valuation.

As you can see these stocks had an average of 10 funds with bullish positions and the average amount invested in these stocks was $109 million. That figure was just $23 million in INVN’s case. Global Eagle Acquisition Corp (NASDAQ:ENT) is the most popular stock in this table. On the other hand The Marcus Corporation (NYSE:MCS) is the least popular one with only nine bullish hedge fund positions. Compared to these stocks InvenSense Inc (NYSE:INVN) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none