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Should You Avoid Mellanox Technologies, Ltd. (MLNX)?

In today’s marketplace, there are a multitude of metrics investors can use to monitor stocks. A duo of the most useful are hedge fund and insider trading movement. At Insider Monkey, our research analyses have shown that, historically, those who follow the best picks of the best investment managers can beat the market by a significant amount (see just how much).

Just as crucial, optimistic insider trading activity is another way to look at the stock market universe. Just as you’d expect, there are a number of motivations for a bullish insider to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the market-beating potential of this strategy if “monkeys” understand where to look (learn more here).

Mellanox Technologies, Ltd. (NASDAQ:MLNX)

What’s more, let’s analyze the recent info for Mellanox Technologies, Ltd. (NASDAQ:MLNX).

What does the smart money think about Mellanox Technologies, Ltd. (NASDAQ:MLNX)?

In preparation for the third quarter, a total of 9 of the hedge funds we track were bullish in this stock, a change of -47% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes meaningfully.

When using filings from the hedgies we track, Rob Butts and Josh Clark’s Southpoint Capital Advisors had the largest position in Mellanox Technologies, Ltd. (NASDAQ:MLNX), worth close to $51.9 million, accounting for 3.2% of its total 13F portfolio. On Southpoint Capital Advisors’s heels is Coatue Management, managed by Philippe Laffont, which held a $42.8 million position; 0.5% of its 13F portfolio is allocated to the company. Some other hedgies with similar optimism include Charles Clough’s Clough Capital Partners, Spencer M. Waxman’s Shannon River Fund Management and Philip Hempleman’s Ardsley Partners.

Due to the fact Mellanox Technologies, Ltd. (NASDAQ:MLNX) has faced declining interest from upper-tier hedge fund managers, it’s safe to say that there exists a select few funds who sold off their entire stakes at the end of the second quarter. Intriguingly, Donald Chiboucis’s Columbus Circle Investors dropped the largest position of the 450+ funds we watch, valued at an estimated $14 million in stock. Jim Simons’s fund, Renaissance Technologies, also cut its stock, about $11.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 8 funds at the end of the second quarter.

What have insiders been doing with Mellanox Technologies, Ltd. (NASDAQ:MLNX)?

Insider buying made by high-level executives is particularly usable when the company in focus has seen transactions within the past 180 days. Over the latest 180-day time frame, Mellanox Technologies, Ltd. (NASDAQ:MLNX) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Mellanox Technologies, Ltd. (NASDAQ:MLNX). These stocks are Cypress Semiconductor Corporation (NASDAQ:CY), Advanced Micro Devices, Inc. (NYSE:AMD), Atmel Corporation (NASDAQ:ATML), Vishay Intertechnology (NYSE:VSH), and Cavium Inc (NASDAQ:CAVM). This group of stocks are the members of the semiconductor – broad line industry and their market caps are closest to MLNX’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Cypress Semiconductor Corporation (NASDAQ:CY) 13 0 0
Advanced Micro Devices, Inc. (NYSE:AMD) 17 0 0
Atmel Corporation (NASDAQ:ATML) 25 0 0
Vishay Intertechnology (NYSE:VSH) 24 0 0
Cavium Inc (NASDAQ:CAVM) 18 0 0

Using the results shown by our strategies, average investors must always keep one eye on hedge fund and insider trading activity, and Mellanox Technologies, Ltd. (NASDAQ:MLNX) is an important part of this process.

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