Should You Avoid Avago Technologies Ltd (AVGO)?

Avago Technologies Ltd (NASDAQ:AVGO) was in 28 hedge funds’ portfolio at the end of March. AVGO shareholders have witnessed a decrease in hedge fund interest lately. There were 35 hedge funds in our database with AVGO positions at the end of the previous quarter.

If you’d ask most market participants, hedge funds are viewed as slow, outdated investment tools of the past. While there are over 8000 funds trading today, we at Insider Monkey choose to focus on the moguls of this group, close to 450 funds. Most estimates calculate that this group controls most of the smart money’s total capital, and by monitoring their highest performing investments, we have spotted a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum 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 23.3 percentage points in 8 months (check out a sample of our picks).

Just as beneficial, positive insider trading activity is a second way to break down the world of equities. There are lots of motivations for an insider to get rid of shares of his or her company, but just one, very simple reason why they would buy. Plenty of academic studies have demonstrated the useful potential of this method if shareholders understand what to do (learn more here).

With these “truths” under our belt, it’s important to take a peek at the latest action regarding Avago Technologies Ltd (NASDAQ:AVGO).

How are hedge funds trading Avago Technologies Ltd (NASDAQ:AVGO)?

At the end of the first quarter, a total of 28 of the hedge funds we track were bullish in this stock, a change of -20% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their stakes substantially.

When looking at the hedgies we track, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in Avago Technologies Ltd (NASDAQ:AVGO). Citadel Investment Group has a $173.1 million position in the stock, comprising 0.3% of its 13F portfolio. On Citadel Investment Group’s heels is Donald Chiboucis of Columbus Circle Investors, with a $109.8 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining hedge funds that are bullish include Richard Chilton’s Chilton Investment Company, Jim Simons’s Renaissance Technologies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

Because Avago Technologies Ltd (NASDAQ:AVGO) has faced bearish sentiment from hedge fund managers, we can see that there is a sect of funds who sold off their positions entirely in Q1. Interestingly, Lee Ainslie’s Maverick Capital cut the biggest stake of the “upper crust” of funds we key on, totaling close to $180.2 million in stock., and Panayotis Takis Sparaggis of Alkeon Capital Management was right behind this move, as the fund cut about $21.5 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 7 funds in Q1.

How have insiders been trading Avago Technologies Ltd (NASDAQ:AVGO)?

Bullish insider trading is most useful when the primary stock in question has experienced transactions within the past half-year. Over the last half-year time frame, Avago Technologies Ltd (NASDAQ:AVGO) has seen zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Avago Technologies Ltd (NASDAQ:AVGO). These stocks are Freescale Semiconductor Ltd (NYSE:FSL), AU Optronics Corp. (ADR) (NYSE:AUO), STMicroelectronics N.V. (ADR) (NYSE:STM), NXP Semiconductors NV (NASDAQ:NXPI), and Maxim Integrated Products Inc. (NASDAQ:MXIM). This group of stocks are in the 0 industry and their market caps resemble AVGO’s market cap.

With the returns demonstrated by Insider Monkey’s time-tested strategies, everyday investors should always monitor hedge fund and insider trading sentiment, and Avago Technologies Ltd (NASDAQ:AVGO) shareholders fit into this picture quite nicely.

Click here to learn why you should track hedge funds