According to a recent filing with the Securities and Exchange Commission, Matthew Sidman‘s Three Bays Capital has hiked its stake in Cypress Semiconductor Corporation (NASDAQ:CY) by a massive 10.27 million shares to 18.49 million shares. The holding represents 5.6% of the company’s outstanding stock. We decided to analyze if Three Bays’ move warrants an investment in the company in question based on hedge fund activity and insider trading, or whether Three Bays is swimming in the wrong bay on this one. Let’s see if we can decide.
As it turns out, Sidman is not the only big-time money manager bullish on Cypress Semiconductor Corporation (NASDAQ:CY) right now. Hedge funds were extremely bullish on the stock during the first quarter as hedge fund interest in the company climbed by 2.2 percentage points over the previous quarter. Among the firms that we track, a total of 39 had an investment of $1.07 billion in the company at the end of March, compared to just 23 funds with $263.26 million in shares at the end of the previous quarter.
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The company was lately involved in a bidding war for Integrated Silicon (NASDAQ:ISSI), which it lost to the Chinese investor group Uphill. Cypress Semiconductor Corporation (NASDAQ:CY)’s $22.60 per share bid was outdone by Uphill’s $23 per share offer. Although Cypress missed both the top and bottom line estimates for its first quarter financial results, the company has provided strong guidance for the second quarter. The range of revenue provided by the company, of between $475 million and $500 million is better than the consensus estimate of $482.3 million at the midpoint, while the EPS range of $0.11 to $0.15 also has a significant upside possibility when compared with the $0.12 estimate.
This has been made possible by the company’s $5 billion merger with Spansion (NYSE:CODE), which has transformed Cypress Semiconductor Corporation (NASDAQ:CY) into an embedded systems company, given its dominant position in touch-sensing controllers and SRAMs; now it has flash memory and microcontrollers under its belt too, owing to the acquisition. The company is trading relatively cheaply when its twelve month trailing price-to-sales ratio of 5.12 is compared with the industry’s rather bloated average of 35.52. Moreover, Cypress Semiconductor Corporation (NASDAQ:CY) also offers a dividend yield of 3.73%.
As far as insider trading is concerned, Raymond H Bingham, who is a director at Cypress Semiconductor Corporation (NASDAQ:CY) sold about 176,530 shares of the company in May. Another insider sale was made by the company’s executive vice president, Daniel J McCranie, who sold about 315,422 shares at the end of April.
How are hedge funds trading Cypress Semiconductor Corporation (NASDAQ:CY)
Of the funds that we track, Soros Fund Management, managed by George Soros, holds the most valuable position in Cypress Semiconductor Corporation (NASDAQ:CY). Soros Fund Management has a $186.5 million position in the stock, comprising 1.8% of its 13F portfolio. Remaining hedgies that are bullish comprise Israel Englander’s Millennium Management, Ken Griffin‘s Citadel Investment Group, and Dmitry Balyasny’s Balyasny Asset Management.
Consequently, key hedge funds have jumped into Cypress Semiconductor Corporation (NASDAQ:CY) headfirst. Balyasny Asset Management assembled the most valuable position in Cypress Semiconductor Corporation (NASDAQ:CY), now holding a $93 million position in the company at the end of the first quarter. Leon Shaulov’s Maplelane Capital also initiated a $44.1 million position during the quarter. Daniel Benton‘s Andor Capital Management, and Charles Clough’s Clough Capital Partners were also among the new Cypress investors in the quarter.
Although up by nearly 9.4% over the last year, Cypress Semiconductor Corporation (NASDAQ:CY)’s stock has depreciated by more than 18% so far this year. In comparison, the semiconductors industry has gained nearly 8% year-to-date and 30.38% over the past year. Given the extremely bullish hedge fund sentiment, the company’s solid financials, the undervalued nature of the stock, and its strong dividend yield, we feel quite confident in recommending Cypress as a great buy-low candidate.
Disclosure: None
