Should You Avoid GSI Technology, Inc. (GSIT)?

We view hedge fund selling in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Two Sigma Advisors. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case here because none of the 700+ hedge funds tracked by Insider Monkey identified GSI Technology, Inc. (NASDAQ:GSIT) as a viable investment and initiated a position in the stock.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as GSI Technology, Inc. (NASDAQ:GSIT) but similarly valued. These stocks are Symmetry Surgical Inc (NASDAQ:SSRG), Aurinia Pharmaceuticals Inc (NASDAQ:AUPH), Diana Containerships Inc (NASDAQ:DCIX), and Comstock Resources Inc (NYSE:CRK). This group of stocks’ market valuations are similar to GSI Technology, Inc. (NASDAQ:GSIT)’s market valuation.

As you can see, these stocks had an average of 6 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $9 million in GSI Technology, Inc. (NASDAQ:GSIT)’s case. Symmetry Surgical Inc (NASDAQ:SSRG) is the most popular stock in this table. On the other hand, Aurinia Pharmaceuticals Inc (NASDAQ:AUPH) is the least popular one with only 4 bullish hedge fund positions. GSI Technology, Inc. (NASDAQ:GSIT) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Symmetry Surgical Inc (NASDAQ:SSRG) might be a better candidate to consider a long position.