InvenSense Inc (INVN): Hedge Funds and Insiders Are Bearish, What Should You Do?: QLogic Corporation (QLGC), MEMC Electronic Materials, Inc. (WFR)

InvenSense Inc (NYSE:INVN) was in 11 hedge funds’ portfolio at the end of the fourth quarter of 2012. INVN shareholders have witnessed a decrease in support from the world’s most elite money managers lately. There were 16 hedge funds in our database with INVN holdings at the end of the previous quarter.

To the average investor, there are tons of methods investors can use to analyze Mr. Market. A pair of the most underrated are hedge fund and insider trading sentiment. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the elite investment managers can outperform the market by a very impressive margin (see just how much).

Equally as important, bullish insider trading activity is a second way to break down the stock market universe. There are a variety of stimuli for a corporate insider to cut shares of his or her company, but just one, very clear reason why they would behave bullishly. Plenty of academic studies have demonstrated the valuable potential of this method if investors know where to look (learn more here).

Consequently, it’s important to take a gander at the recent action encompassing InvenSense Inc (NYSE:INVN).

How have hedgies been trading InvenSense Inc (NYSE:INVN)?

In preparation for this year, a total of 11 of the hedge funds we track were bullish in this stock, a change of -31% from one quarter earlier. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly.

Of the funds we track, Citadel Investment Group, managed by Ken Griffin, holds the largest position in InvenSense Inc (NYSE:INVN). Citadel Investment Group has a $11.7 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Crosslink Capital, managed by Seymour Sy Kaufman and Michael Stark, which held a $9 million position; 1% of its 13F portfolio is allocated to the stock. Remaining hedge funds that hold long positions include Steven Cohen’s SAC Capital Advisors, SAC Subsidiary’s CR Intrinsic Investors and Mark Kingdon’s Kingdon Capital.

Because InvenSense Inc (NYSE:INVN) has faced a declination in interest from hedge fund managers, it’s easy to see that there were a few hedgies that slashed their full holdings in Q4. Interestingly, Eric Bannasch’s Cadian Capital cut the largest stake of the “upper crust” of funds we key on, comprising about $14.2 million in stock., and Stanley Shopkorn and Douglas Day of Hilltop Park Associates was right behind this move, as the fund dumped about $3.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds in Q4.

Insider trading activity in InvenSense Inc (NYSE:INVN)

Insider buying is at its handiest when the primary stock in question has experienced transactions within the past half-year. Over the latest six-month time period, InvenSense Inc (NYSE:INVN) has seen zero unique insiders buying, and 6 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to InvenSense Inc (NYSE:INVN). These stocks are QLogic Corporation (NASDAQ:QLGC), MEMC Electronic Materials, Inc. (NYSE:WFR), Cabot Microelectronics Corporation (NASDAQ:CCMP), TriQuint Semiconductor (NASDAQ:TQNT), and Diodes Incorporated (NASDAQ:DIOD). This group of stocks are in the semiconductor – integrated circuits industry and their market caps resemble INVN’s market cap.

With the returns demonstrated by the aforementioned strategies, everyday investors must always watch hedge fund and insider trading activity, and InvenSense Inc (NYSE:INVN) applies perfectly to this mantra.

Click here to learn why you should track hedge funds