Should You Avoid Rambus Inc. (RMBS)?

Rambus Inc. (NASDAQ:RMBS) was in 8 hedge funds’ portfolio at the end of March. RMBS has seen a decrease in enthusiasm from smart money of late. There were 8 hedge funds in our database with RMBS positions at the end of the previous quarter.

To most traders, hedge funds are perceived as worthless, outdated investment tools of years past. While there are greater than 8000 funds in operation at the moment, we at Insider Monkey choose to focus on the leaders of this group, about 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total capital, and by monitoring their best investments, we have uncovered a few investment strategies that have historically beaten the broader indices. Our small-cap hedge fund strategy outstripped 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 topped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Just as beneficial, positive insider trading activity is a second way to parse down the stock market universe. Obviously, there are lots of incentives for a bullish insider to drop shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Plenty of academic studies have demonstrated the market-beating potential of this tactic if investors know where to look (learn more here).

With all of this in mind, it’s important to take a gander at the key action regarding Rambus Inc. (NASDAQ:RMBS).

How are hedge funds trading Rambus Inc. (NASDAQ:RMBS)?

At the end of the first quarter, a total of 8 of the hedge funds we track held long positions in this stock, a change of 0% from the first quarter. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were boosting their holdings considerably.

Of the funds we track, Millennium Management, managed by Israel Englander, holds the largest position in Rambus Inc. (NASDAQ:RMBS). Millennium Management has a $4.2 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Jim Simons of Renaissance Technologies, with a $3.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other hedgies with similar optimism include Glenn Russell Dubin’s Highbridge Capital Management, and D. E. Shaw’s D E Shaw.

Seeing as Rambus Inc. (NASDAQ:RMBS) has witnessed declining sentiment from the smart money, logic holds that there were a few money managers that elected to cut their entire stakes at the end of the first quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dumped the largest position of all the hedgies we monitor, totaling about $1.4 million in stock.. Matthew Hulsizer’s fund, PEAK6 Capital Management, also cut its stock, about $0.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

What do corporate executives and insiders think about Rambus Inc. (NASDAQ:RMBS)?

Insider trading activity, especially when it’s bullish, is best served when the company in question has experienced transactions within the past six months. Over the last 180-day time period, Rambus Inc. (NASDAQ:RMBS) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).

With the results exhibited by the aforementioned studies, retail investors should always watch hedge fund and insider trading sentiment, and Rambus Inc. (NASDAQ:RMBS) is an important part of this process.

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