Photronics, Inc. (PLAB): Hedge Funds Are Bearish and Insiders Are Undecided, What Should You Do?

Is it smart to be bullish on Photronics, Inc. (NASDAQ:PLAB)?

If you were to ask many investors, hedge funds are assumed to be useless, outdated investment tools of a period lost to current times. Although there are more than 8,000 hedge funds with their doors open currently, this site focuses on the upper echelon of this group, close to 525 funds. Analysts calculate that this group has its hands on the majority of the hedge fund industry’s total assets, and by watching their highest quality equity investments, we’ve formulated a number of investment strategies that have historically beaten the S&P 500. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a 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 outpaced the S&P 500 index by 33 percentage points in 11 months (explore the details and some picks here).

Just as crucial, bullish insider trading sentiment is another way to look at the financial markets. There are plenty of motivations for a corporate insider to downsize shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several empirical studies have demonstrated the useful potential of this method if you know where to look (learn more here).

Now that that’s out of the way, it’s important to discuss the newest info for Photronics, Inc. (NASDAQ:PLAB).

Hedge fund activity in Photronics, Inc. (NASDAQ:PLAB)

Heading into Q3, a total of 10 of the hedge funds we track were bullish in this stock, a change of -23% from the first quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were increasing their stakes significantly.

When using filings from the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the most valuable position in Photronics, Inc. (NASDAQ:PLAB). Royce & Associates has a $6.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which held a $3.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining peers that are bullish include Cliff Asness’s AQR Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors and Joel Greenblatt’s Gotham Asset Management.

Because Photronics, Inc. (NASDAQ:PLAB) has witnessed declining interest from upper-tier hedge fund managers, logic holds that there exists a select few hedge funds who were dropping their full holdings last quarter. Intriguingly, Ken Griffin’s Citadel Investment Group said goodbye to the biggest stake of the 450+ funds we key on, valued at about $0.7 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also dropped its stock, about $0.2 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 3 funds last quarter.

What do corporate executives and insiders think about Photronics, Inc. (NASDAQ:PLAB)?

Insider buying made by high-level executives is most useful when the company in question has experienced transactions within the past half-year. Over the latest half-year time period, Photronics, Inc. (NASDAQ:PLAB) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Photronics, Inc. (NASDAQ:PLAB). These stocks are ParkerVision, Inc. (NASDAQ:PRKR), Audience Inc (NASDAQ:ADNC), Applied Micro Circuits Corporation (NASDAQ:AMCC), Exar Corporation (NASDAQ:EXAR), and Volterra Semiconductor Corporation (NASDAQ:VLTR). This group of stocks are in the semiconductor – integrated circuits industry and their market caps resemble PLAB’s market cap.

Using the results explained by the previously mentioned analyses, average investors should always track hedge fund and insider trading activity, and Photronics, Inc. (NASDAQ:PLAB) is an important part of this process.

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