Should You Buy InvenSense Inc (INVN)?

InvenSense Inc (NYSE:INVN) has seen an increase in hedge fund sentiment lately.

According to most investors, hedge funds are assumed to be worthless, old financial tools of the past. While there are greater than 8000 funds in operation at present, we at Insider Monkey choose to focus on the elite of this club, around 450 funds. Most estimates calculate that this group controls the lion’s share of the hedge fund industry’s total capital, and by watching their best investments, we have formulated a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy beat 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 topped the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as beneficial, optimistic insider trading sentiment is a second way to break down the stock market universe. As the old adage goes: there are lots of reasons for a bullish 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 valuable potential of this tactic if investors understand where to look (learn more here).

Now, it’s important to take a peek at the key action surrounding InvenSense Inc (NYSE:INVN).

What does the smart money think about InvenSense Inc (NYSE:INVN)?

In preparation for this quarter, a total of 18 of the hedge funds we track were long in this stock, a change of 38% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially.

Of the funds we track, Andor Capital Management, managed by Daniel Benton, holds the largest position in InvenSense Inc (NYSE:INVN). Andor Capital Management has a $10.7 million position in the stock, comprising 1.4% of its 13F portfolio. On Andor Capital Management’s heels is Royce & Associates, managed by Chuck Royce, which held a $7.2 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedgies that are bullish include SAC Subsidiary’s CR Intrinsic Investors, Jason F. Harris’s Kendall Square Capital and Scott Fine and Peter Richards’s Empire Capital Management.

As industrywide interest jumped, specific money managers were leading the bulls’ herd. Andor Capital Management, managed by Daniel Benton, assembled the largest position in InvenSense Inc (NYSE:INVN). Andor Capital Management had 10.7 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also made a $7.2 million investment in the stock during the quarter. The following funds were also among the new INVN investors: Scott Fine and Peter Richards’s Empire Capital Management, Mike Vranos’s Ellington, and D. E. Shaw’s D E Shaw.

How are insiders trading InvenSense Inc (NYSE:INVN)?

Insider buying is best served when the primary stock in question has seen transactions within the past half-year. Over the latest half-year time period, InvenSense Inc (NYSE:INVN) has experienced zero unique insiders buying, and 6 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to InvenSense Inc (NYSE:INVN). These stocks are QLogic Corporation (NASDAQ:QLGC), MEMC Electronic Materials, Inc. (NYSE:WFR), Cabot Microelectronics Corporation (NASDAQ:CCMP), TriQuint Semiconductor (NASDAQ:TQNT), and Diodes Incorporated (NASDAQ:DIOD). This group of stocks are the members of the semiconductor – integrated circuits industry and their market caps are closest to INVN’s market cap.

With the returns shown by Insider Monkey’s tactics, retail investors should always keep an eye on hedge fund and insider trading sentiment, and InvenSense Inc (NYSE:INVN) applies perfectly to this mantra.

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