Hedge Funds Are Dumping Pixelworks, Inc. (PXLW)

Hedge funds are not perfect. They have their bad picks just like everyone else. Micron, a stock hedge funds have loved, lost 50% during the last 12 months ending in October 30. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% in the same time period, vs. a gain of 5.2% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Pixelworks, Inc. (NASDAQ:PXLW).

Is Pixelworks, Inc. (NASDAQ:PXLW) going to take off soon? The smart money is reducing their bets on the stock. The number of long hedge fund bets dropped by 4 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Dover Motorsports, Inc. (NYSE:DVD), Universal Technical Institute, Inc. (NYSE:UTI), and The L.S. Starrett Company (NYSE:SCX) to gather more data points.

With all of this in mind, we’re going to take a gander at the recent action regarding Pixelworks, Inc. (NASDAQ:PXLW).

Hedge fund activity in Pixelworks, Inc. (NASDAQ:PXLW)

At the end of the third quarter, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -31% from the second quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, William C. Martin’s Raging Capital Management has the largest position in Pixelworks, Inc. (NASDAQ:PXLW), worth close to $2.6 million, amounting to 0.3% of its total 13F portfolio. The second most bullish fund manager is Keane Capital Management, managed by Peter Keane, which holds a $2.3 million position; 3% of its 13F portfolio is allocated to the company. Some other professional money managers that are bullish contain Christopher Zepf and Brian Thonn’s Kingdom Ridge Capital, Warren Lammert’s Granite Point Capital and Matthew Hulsizer’s PEAK6 Capital Management.

Judging by the fact that Pixelworks, Inc. (NASDAQ:PXLW) has faced declining sentiment from the smart money, it’s easy to see that there was a specific group of fund managers that elected to cut their full holdings heading into Q4. Intriguingly, Phil Frohlich’s Prescott Group Capital Management sold off the biggest stake of all the hedgies monitored by Insider Monkey, worth close to $2.9 million in stock. Rob Romero’s fund, Connective Capital Management, also said goodbye to its stock, about $0.9 million worth. These moves are important to note, as total hedge fund interest dropped by 4 funds heading into Q4.

Let’s now take a look at hedge fund activity in other stocks similar to Pixelworks, Inc. (NASDAQ:PXLW). These stocks are Dover Motorsports, Inc. (NYSE:DVD), Universal Technical Institute, Inc. (NYSE:UTI), The L.S. Starrett Company (NYSE:SCX), and Covisint Corp (NASDAQ:COVS). All of these stocks’ market caps match PXLW’s market cap.

As you can see these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $18 million. That figure was $7 million in PXLW’s case. Universal Technical Institute, Inc. (NYSE:UTI) is the most popular stock in this table. On the other hand The L.S. Starrett Company (NYSE:SCX) is the least popular one with only 4 bullish hedge fund positions. Pixelworks, Inc. (NASDAQ:PXLW) 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 UTI might be a better candidate to consider a long position.