This Metric Says You Are Smart to Buy Magnachip Semiconductor Corp (MX)

Should Magnachip Semiconductor Corp (NYSE:MX) track the following data?

Now, according to many traders, hedge funds are viewed as bloated, outdated financial vehicles of an era lost to time. Although there are over 8,000 hedge funds with their doors open currently, Insider Monkey aim at the elite of this group, about 525 funds. Analysts calculate that this group controls most of the smart money’s total assets, and by tracking their best stock picks, we’ve uncovered a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points annually 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 outperformed the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Just as useful, bullish insider trading sentiment is a second way to look at the marketplace. There are a variety of stimuli for an insider to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Several empirical studies have demonstrated the market-beating potential of this method if investors know where to look (learn more here).

Furthermore, let’s examine the newest info about Magnachip Semiconductor Corp (NYSE:MX).

What does the smart money think about Magnachip Semiconductor Corp (NYSE:MX)?

In preparation for the third quarter, a total of 24 of the hedge funds we track held long positions in this stock, a change of 50% from the previous quarter. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes significantly.

According to our 13F database, Marc Lasry’s Avenue Capital had the biggest position in Magnachip Semiconductor Corp (NYSE:MX), worth close to $136.7 million, accounting for 16.8% of its total 13F portfolio. On Avenue Capital’s heels is SAC Capital Advisors, managed by Steven Cohen, which held a $25 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism include Anthony Bozza’s Lakewood Capital Management, Joseph A. Jolson’s Harvest Capital Strategies and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

With a general bullishness amongst the titans, certain bigger names were leading the bulls’ herd. Avenue Capital, managed by Marc Lasry, established the largest position in Magnachip Semiconductor Corp (NYSE:MX). Avenue Capital had 136.7 million invested in the company at the end of the quarter. Steven Cohen’s SAC Capital Advisors also made a $25 million investment in the stock during the quarter. The other funds with brand new MX positions are Anthony Bozza’s Lakewood Capital Management, Joseph A. Jolson’s Harvest Capital Strategies, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital.

How have insiders been trading Magnachip Semiconductor Corp (NYSE:MX)?

Legal insider trading, particularly when it’s bullish, is particularly usable when the company in question has seen transactions within the past six months. Over the last 180-day time period, Magnachip Semiconductor Corp (NYSE:MX) has experienced zero unique insiders buying, and zero insider sales (see the details of insider trades here).

We’ll also take a look at the relationship between both of these indicators in other stocks similar to Magnachip Semiconductor Corp (NYSE:MX). These stocks are GT Advanced Technologies Inc (NASDAQ:GTAT), Himax Technologies, Inc. (ADR) (NASDAQ:HIMX), Monolithic Power Systems, Inc. (NASDAQ:MPWR), Lattice Semiconductor (NASDAQ:LSCC), and JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO). This group of stocks are the members of the semiconductor – specialized industry and their market caps are similar to MX’s market cap.

Using the returns demonstrated by our analyses, average investors should always track hedge fund and insider trading activity, and Magnachip Semiconductor Corp (NYSE:MX) applies perfectly to this mantra.

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