Hedge Funds Are Buying PDF Solutions, Inc. (PDFS)

As we already know from media reports and hedge fund investor letters, many hedge funds lost money in the third quarter, blaming macroeconomic conditions and unpredictable events that hit several sectors, with healthcare among them. Nevertheless, most investors decided to stick to their bullish thesis and their long-term focus allows us to profit from the recent declines. In particular, let’s take a look at what hedge funds think about PDF Solutions, Inc. (NASDAQ:PDFS) in this article.

Is PDF Solutions, Inc. (NASDAQ:PDFS) a sound investment today? The smart money is getting more optimistic. The number of long hedge fund bets inched up by 5 lately. PDFS was in 19 hedge funds’ portfolios at the end of the third quarter of 2015. There were 14 hedge funds in our database with PDFS positions at the end of the previous quarter. At the end of this article we will also compare PDFS to other stocks including Immersion Corporation (NASDAQ:IMMR), Las Vegas Sands Corp. (NYSE:SAND), and Landec Corporation (NASDAQ:LNDC) to get a better sense of its popularity.

If you’d ask most traders, hedge funds are viewed as underperforming, old financial vehicles of yesteryear. While there are over 8000 funds trading at the moment, Our researchers choose to focus on the crème de la crème of this club, approximately 700 funds. These hedge fund managers oversee most of the smart money’s total asset base, and by keeping an eye on their best investments, Insider Monkey has unsheathed various investment strategies that have historically surpassed the broader indices. Insider Monkey’s small-cap hedge fund strategy defeated the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Keeping this in mind, let’s go over the key action surrounding PDF Solutions, Inc. (NASDAQ:PDFS).

Hedge fund activity in PDF Solutions, Inc. (NASDAQ:PDFS)

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 36% from the previous quarter. With the smart money’s capital changing hands, there exist a few key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Cardinal Capital, managed by Amy Minella, holds the biggest position in PDF Solutions, Inc. (NASDAQ:PDFS). Cardinal Capital has an $26.5 million position in the stock, comprising 1.7% of its 13F portfolio. Sitting at the No. 2 spot is Shannon River Fund Management, managed by Spencer M. Waxman, which holds an $10.4 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish contain Brian C. Freckmann’s Lyon Street Capital, Jim Simons’s Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

As one would reasonably expect, key hedge funds have jumped into PDF Solutions, Inc. (NASDAQ:PDFS) headfirst. Citadel Investment Group, managed by Ken Griffin, established a position in PDF Solutions, Inc. (NASDAQ:PDFS). Citadel Investment Group had $0.5 million invested in the company at the end of the quarter. Peter Muller’s PDT Partners also made an $0.3 million investment in the stock during the quarter. The following funds were also among the new PDFS investors: Glenn Russell Dubin’s Highbridge Capital Management, D. E. Shaw’s D E Shaw, and Jacob Gottlieb’s Visium Asset Management.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as PDF Solutions, Inc. (NASDAQ:PDFS) but similarly valued. These stocks are Immersion Corporation (NASDAQ:IMMR), Las Vegas Sands Corp. (NYSE:SAND), Landec Corporation (NASDAQ:LNDC), and Stage Stores Inc (NYSE:SSI). All of these stocks’ market caps are closest to PDFS’s market cap.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $58 million. That figure was $56 million in PDFS’s case. Immersion Corporation (NASDAQ:IMMR) is the most popular stock in this table. On the other hand Las Vegas Sands Corp. (NYSE:SAND) is the least popular one with only 8 bullish hedge fund positions. PDF Solutions, Inc. (NASDAQ:PDFS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard IMMR might be a better candidate to consider a long position.