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Silicon Image, Inc. (SIMG), GSI Technology, Inc. (GSIT): Should You Buy FormFactor, Inc. (FORM)?

FormFactor, Inc. (NASDAQ:FORM) was in 15 hedge funds’ portfolio at the end of the fourth quarter of 2012. FORM investors should be aware of an increase in hedge fund sentiment of late. There were 13 hedge funds in our database with FORM positions at the end of the previous quarter.

If you’d ask most shareholders, hedge funds are viewed as unimportant, outdated financial vehicles of years past. While there are over 8000 funds in operation at present, we choose to focus on the leaders of this club, close to 450 funds. It is widely believed that this group controls the majority of the smart money’s total asset base, and by monitoring their best equity investments, we have brought to light a number of investment strategies that have historically outperformed Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outperformed the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Equally as beneficial, positive insider trading activity is a second way to break down the financial markets. Obviously, there are plenty of stimuli for a corporate insider to downsize shares of his or her company, but only one, very clear reason why they would behave bullishly. Plenty of empirical studies have demonstrated the valuable potential of this tactic if piggybackers understand where to look (learn more here).

With all of this in mind, it’s important to take a glance at the key action surrounding FormFactor, Inc. (NASDAQ:FORM).

What have hedge funds been doing with FormFactor, Inc. (NASDAQ:FORM)?

At year’s end, a total of 15 of the hedge funds we track were long in this stock, a change of 15% from one quarter earlier. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were boosting their stakes significantly.

According to our comprehensive database, Gregory A. Weaver’s Invicta Capital Management had the biggest position in FormFactor, Inc. (NASDAQ:FORM), worth close to $7 million, accounting for 3% of its total 13F portfolio. Coming in AQR CAPITAL MANAGEMENTsecond is AQR Capital Management, managed by Cliff Asness, which held a $5 million position; the fund has less than 1% of its 13F portfolio invested in the stock. Some other hedgies with similar optimism include Chuck Royce’s Royce & Associates, Seymour Sy Kaufman and Michael Stark’s Crosslink Capital and Jim Simons’s Renaissance Technologies.

Now, key hedge funds have been driving this bullishness. SAC Capital Advisors, managed by Steven Cohen, created the biggest position in FormFactor, Inc. (NASDAQ:FORM). SAC Capital Advisors had $1 million invested in the company at the end of the quarter. Peter A. Wright’s P.A.W. CAPITAL PARTNERS also made a <$1 million investment in the stock during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, Paul Tudor Jones’s Tudor Investment Corp, and Ken Griffin’s Citadel Investment Group.

What do corporate executives and insiders think about FormFactor, Inc. (NASDAQ:FORM)?

Insider trading activity, especially when it’s bullish, is best served when the company we’re looking at has seen transactions within the past half-year. Over the latest half-year time period, FormFactor, Inc. (NASDAQ:FORM) has experienced zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to FormFactor, Inc. (NASDAQ:FORM). These stocks are Silicon Image, Inc. (NASDAQ:SIMG), Entropic Communications, Inc. (NASDAQ:ENTR), GSI Technology, Inc. (NASDAQ:GSIT), Inphi Corporation (NYSE:IPHI), and Kopin Corporation (NASDAQ:KOPN). This group of stocks belong to the semiconductor – broad line industry and their market caps are closest to FORM’s market cap.

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