Is magicJack VocalTec Ltd (CALL) Going to Burn These Hedge Funds?

Is magicJack VocalTec Ltd (NASDAQ:CALL) undervalued? Prominent investors are turning less bullish. The number of long hedge fund positions fell by 1 in recent months.

In the eyes of most traders, hedge funds are seen as underperforming, old investment tools of years past. While there are greater than 8000 funds trading at present, we look at the aristocrats of this club, close to 450 funds. It is estimated that this group controls the lion’s share of all hedge funds’ total asset base, and by paying attention to their highest performing equity investments, we have identified a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per year 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 beaten the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

Just as integral, optimistic insider trading activity is a second way to break down the financial markets. Obviously, there are a variety of stimuli for a corporate insider to cut shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Many academic studies have demonstrated the valuable potential of this strategy if shareholders know what to do (learn more here).

With all of this in mind, we’re going to take a gander at the key action regarding magicJack VocalTec Ltd (NASDAQ:CALL).

What does the smart money think about magicJack VocalTec Ltd (NASDAQ:CALL)?

At year’s end, a total of 7 of the hedge funds we track were long in this stock, a change of -13% from one quarter earlier. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings significantly.

When looking at the hedgies we track, D. E. Shaw’s D E Shaw had the most valuable position in magicJack VocalTec Ltd (NASDAQ:CALL), worth close to $1.8 million, accounting for less than 0.1%% of its total 13F portfolio. The second largest stake is held by Israel Englander of Millennium Management, with a $1.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining hedge funds with similar optimism include John Overdeck and David Siegel’s Two Sigma Advisors, Neil Chriss’s Hutchin Hill Capital and Ken Griffin’s Citadel Investment Group.

Judging by the fact that magicJack VocalTec Ltd (NASDAQ:CALL) has faced declining sentiment from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of fund managers who were dropping their positions entirely in Q4. Interestingly, Guru Ramakrishnan’s Meru Capital dumped the largest investment of all the hedgies we key on, worth close to $3.4 million in stock., and Cliff Asness of AQR Capital Management was right behind this move, as the fund cut about $2.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 1 funds in Q4.

How are insiders trading magicJack VocalTec Ltd (NASDAQ:CALL)?

Bullish insider trading is at its handiest when the primary stock in question has seen transactions within the past six months. Over the last half-year time period, magicJack VocalTec Ltd (NASDAQ:CALL) has experienced zero unique insiders buying, and 1 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to magicJack VocalTec Ltd (NASDAQ:CALL). These stocks are Cincinnati Bell Inc. (NYSE:CBB), EarthLink, Inc. (NASDAQ:ELNK), Hickory Tech Corporation (NASDAQ:HTCO), Shenandoah Telecommunications Company (NASDAQ:SHEN), and FairPoint Communications Inc (NASDAQ:FRP). This group of stocks are in the telecom services – domestic industry and their market caps are similar to CALL’s market cap.

With the returns demonstrated by the aforementioned studies, everyday investors must always monitor hedge fund and insider trading sentiment, and magicJack VocalTec Ltd (NASDAQ:CALL) applies perfectly to this mantra.

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