STMicroelectronics N.V. (ADR) (STM): Are Hedge Funds Right About This Stock?

STMicroelectronics N.V. (ADR) (NYSE:STM) was in 9 hedge funds’ portfolio at the end of March. STM shareholders have witnessed a decrease in hedge fund sentiment in recent months. There were 12 hedge funds in our database with STM holdings at the end of the previous quarter.

To the average investor, there are many indicators investors can use to watch publicly traded companies. Some of the most under-the-radar are hedge fund and insider trading activity. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the top money managers can outperform the broader indices by a significant amount (see just how much).

Just as important, bullish insider trading activity is a second way to break down the financial markets. Obviously, there are lots of stimuli for a corporate insider to get rid of shares of his or her company, but just one, very obvious reason why they would behave bullishly. Plenty of academic studies have demonstrated the market-beating potential of this method if “monkeys” know what to do (learn more here).

Consequently, let’s take a glance at the latest action regarding STMicroelectronics N.V. (ADR) (NYSE:STM).

How are hedge funds trading STMicroelectronics N.V. (ADR) (NYSE:STM)?

Heading into Q2, a total of 9 of the hedge funds we track were long in this stock, a change of -25% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their holdings substantially.

Of the funds we track, Orbis Investment Management, managed by William B. Gray, holds the most valuable position in STMicroelectronics N.V. (ADR) (NYSE:STM). Orbis Investment Management has a $46.8 million position in the stock, comprising 0.4% of its 13F portfolio. Coming in second is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which held a $32.1 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Other hedgies that are bullish include Youlia Miteva’s Proxima Capital Management, Jim Simons’s Renaissance Technologies and Phill Gross and Robert Atchinson’s Adage Capital Management.

Due to the fact that STMicroelectronics N.V. (ADR) (NYSE:STM) has witnessed bearish sentiment from the smart money, we can see that there was a specific group of fund managers who sold off their positions entirely heading into Q2. Intriguingly, Matthew Hulsizer’s PEAK6 Capital Management cut the biggest stake of the 450+ funds we monitor, valued at about $0.3 million in call options. D. E. Shaw’s fund, D E Shaw, also sold off its stock, about $0.3 million worth. These moves are interesting, as total hedge fund interest was cut by 3 funds heading into Q2.

What have insiders been doing with STMicroelectronics N.V. (ADR) (NYSE:STM)?

Bullish insider trading is particularly usable when the company we’re looking at has seen transactions within the past half-year. Over the latest half-year time period, STMicroelectronics N.V. (ADR) (NYSE:STM) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to STMicroelectronics N.V. (ADR) (NYSE:STM). These stocks are Freescale Semiconductor Ltd (NYSE:FSL), AU Optronics Corp. (ADR) (NYSE:AUO), Maxim Integrated Products Inc. (NASDAQ:MXIM), Avago Technologies Ltd (NASDAQ:AVGO), and NXP Semiconductors NV (NASDAQ:NXPI). All of these stocks are in the semiconductor – broad line industry and their market caps match STM’s market cap.

With the returns demonstrated by the aforementioned tactics, retail investors should always monitor hedge fund and insider trading activity, and STMicroelectronics N.V. (ADR) (NYSE:STM) is no exception.

Click here to learn why you should track hedge funds