Is Integrated Device Technology Inc (IDTI) Going to Burn These Hedge Funds?

There are several ways to beat the market, and investing in small cap stocks has historically been one of them. We like to improve the odds of beating the market further by examining what famous hedge fund operators such as Carl Icahn and George Soros think. Those hedge fund operators make billions of dollars each year by hiring the best and the brightest to do research on stocks, including small cap stocks that big brokerage houses simply don’t cover. Because of Carl Icahn and other elite funds’ exemplary historical records, we pay attention to their small cap picks. In this article, we use hedge fund filing data to analyze Integrated Device Technology Inc (NASDAQ:IDTI).

Is Integrated Device Technology Inc (NASDAQ:IDTI) undervalued? Hedge funds are taking a pessimistic view. The number of long hedge fund positions retreated by 1 recently. IDTI was in 25 hedge funds’ portfolios at the end of September. There were 26 hedge funds in our database with IDTI holdings at the end of the previous quarter. At the end of this article we will also compare IDTI to other stocks including Medidata Solutions Inc (NASDAQ:MDSO), Penske Automotive Group, Inc. (NYSE:PAG), and RLJ Lodging Trust (NYSE:RLJ) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, let’s check out the latest action surrounding Integrated Device Technology Inc (NASDAQ:IDTI).

What does the smart money think about Integrated Device Technology Inc (NASDAQ:IDTI)?

Heading into the fourth quarter of 2016, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, down 4% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jim Simons’s Renaissance Technologies has the most valuable position in Integrated Device Technology Inc (NASDAQ:IDTI), worth close to $69.2 million and corresponding to 0.1% of its total 13F portfolio. The second largest stake is held by AQR Capital Management, managed by Cliff Asness, which holds a $69.1 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that are bullish encompass Ken Griffin’s Citadel Investment Group, Paul Marshall and Ian Wace’s Marshall Wace LLP and Douglas T. Granat’s Trigran Investments.

Seeing as Integrated Device Technology Inc (NASDAQ:IDTI) has experienced bearish sentiment from the smart money, logic holds that there were a few hedge funds who were dropping their entire stakes heading into Q4. It’s worth mentioning that Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the largest stake of the 700 funds followed by Insider Monkey, worth close to $11.9 million in stock. Israel Englander’s fund, Millennium Management, also sold off its stock, about $5.7 million worth of IDTI shares. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 1 fund heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Integrated Device Technology Inc (NASDAQ:IDTI). These stocks are Medidata Solutions Inc (NASDAQ:MDSO), Penske Automotive Group, Inc. (NYSE:PAG), RLJ Lodging Trust (NYSE:RLJ), and MB Financial, Inc. (NASDAQ:MBFI). This group of stocks’ market valuations are closest to IDTI’s market valuation.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was an impressive $311 million in IDTI’s case. Medidata Solutions Inc (NASDAQ:MDSO) is the most popular stock in this table. On the other hand RLJ Lodging Trust (NYSE:RLJ) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Integrated Device Technology Inc (NASDAQ:IDTI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: none.