Hedge Funds Are Betting On PDF Solutions, Inc. (PDFS)

PDF Solutions, Inc. (NASDAQ:PDFS) investors should be aware of an increase in activity from the world’s largest hedge funds in recent months.

According to most traders, hedge funds are assumed to be worthless, outdated financial vehicles of yesteryear. While there are over 8000 funds with their doors open at the moment, we choose to focus on the leaders of this group, around 450 funds. It is estimated that this group controls the majority of the hedge fund industry’s total asset base, and by watching their highest performing equity investments, we have discovered a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy beat 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 outpaced the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Equally as important, positive insider trading sentiment is a second way to parse down the investments you’re interested in. Obviously, there are a variety of motivations for an executive to sell shares of his or her company, but only one, very clear reason why they would behave bullishly. Various academic studies have demonstrated the market-beating potential of this tactic if investors know where to look (learn more here).

With all of this in mind, we’re going to take a gander at the key action encompassing PDF Solutions, Inc. (NASDAQ:PDFS).

What have hedge funds been doing with PDF Solutions, Inc. (NASDAQ:PDFS)?

Heading into Q2, a total of 10 of the hedge funds we track held long positions in this stock, a change of 25% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly.

When looking at the hedgies we track, Spencer M. Waxman’s Shannon River Fund Management had the most valuable position in PDF Solutions, Inc. (NASDAQ:PDFS), worth close to $21.6 million, comprising 2.5% of its total 13F portfolio. On Shannon River Fund Management’s heels is McKinley Capital Management, managed by Robert B. Gillam, which held a $4.4 million position; 0.2% of its 13F portfolio is allocated to the stock. Other hedgies that hold long positions include Jim Simons’s Renaissance Technologies, Richard Driehaus’s Driehaus Capital and Ken Griffin’s Citadel Investment Group.

Now, some big names have jumped into PDF Solutions, Inc. (NASDAQ:PDFS) headfirst. Hutchin Hill Capital, managed by Neil Chriss, initiated the most outsized position in PDF Solutions, Inc. (NASDAQ:PDFS). Hutchin Hill Capital had 0.3 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also made a $0.2 million investment in the stock during the quarter.

How have insiders been trading PDF Solutions, Inc. (NASDAQ:PDFS)?

Insider trading activity, especially when it’s bullish, is particularly usable when the primary stock in question has seen transactions within the past half-year. Over the last six-month time period, PDF Solutions, Inc. (NASDAQ:PDFS) has seen zero unique insiders buying, and 2 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to PDF Solutions, Inc. (NASDAQ:PDFS). These stocks are Mentor Graphics Corp (NASDAQ:MENT), ACI Worldwide Inc (NASDAQ:ACIW), Tyler Technologies, Inc. (NYSE:TYL), ScanSource, Inc. (NASDAQ:SCSC), and Systemax Inc. (NYSE:SYX). This group of stocks are in the technical & system software industry and their market caps are closest to PDFS’s market cap.