Should You Avoid Avago Technologies Ltd (AVGO)?

Is Avago Technologies Ltd (NASDAQ:AVGO) a sell?

If you were to ask many investors, hedge funds are seen as useless, old financial tools of an era lost to time. Although there are more than 8,000 hedge funds trading today, this site aim at the moguls of this group, about 525 funds. Analysts calculate that this group controls the lion’s share of all hedge funds’ total capital, and by keeping an eye on their highest quality stock picks, we’ve uncovered a few investment strategies that have historically beaten the S&P 500. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 33 percentage points in 11 months (find the details here).

Equally as useful, bullish insider trading sentiment is another way to look at the stock market universe. Just as you’d expect, there are many incentives for an insider to cut shares of his or her company, but just one, very clear reason why they would initiate a purchase. Plenty of empirical studies have demonstrated the impressive potential of this method if you know what to do (learn more here).

Thus, we’re going to study the latest info surrounding Avago Technologies Ltd (NASDAQ:AVGO).

What does the smart money think about Avago Technologies Ltd (NASDAQ:AVGO)?

At Q2’s end, a total of 26 of the hedge funds we track held long positions in this stock, a change of -7% from the first quarter. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings considerably.

When using filings from the hedgies we track, Ken Griffin’s Citadel Investment Group had the largest position in Avago Technologies Ltd (NASDAQ:AVGO), worth close to $118.1 million, comprising 0.2% of its total 13F portfolio. Sitting at the No. 2 spot is Richard Chilton of Chilton Investment Company, with a $71.9 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Jim Simons’s Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Cliff Asness’s AQR Capital Management.

Due to the fact Avago Technologies Ltd (NASDAQ:AVGO) has faced declining interest from the top-tier hedge fund industry, it’s easy to see that there were a few funds who sold off their positions entirely heading into Q2. It’s worth mentioning that Donald Chiboucis’s Columbus Circle Investors dropped the largest investment of the “upper crust” of funds we key on, comprising close to $109.8 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also cut its stock, about $29.4 million worth. These transactions are interesting, as aggregate hedge fund interest fell by 2 funds heading into Q2.

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

Bullish insider trading is best served when the company we’re looking at has seen transactions within the past 180 days. Over the last half-year time frame, Avago Technologies Ltd (NASDAQ:AVGO) has experienced zero unique insiders purchasing, and 5 insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators 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). All of these stocks are in the semiconductor – broad line industry and their market caps match AVGO’s market cap.

Using the results explained by Insider Monkey’s strategies, average investors must always pay attention to hedge fund and insider trading activity, and Avago Technologies Ltd (NASDAQ:AVGO) is an important part of this process.

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