First Eagle Investment Management has the highest amount of shares among them. The total value of its shares is $54.3 million. Ken Griffin's Citadel Investment Group made investments worth $52.7 million during the quarter.
Investors cannot imitate every hedge trader purchase, and should not do so blindly. Besides, some of the filings do not reflect current buying or selling activities. But purchases around AMD prove to ascertain that there could be bullish movements in the next few months.
This may be why many of the company's insiders have shown interest in the stock. The amount of insider purchases in the last year is 11.4 million shares, compared with insider sales of 0.25 million. The list of bullish insiders include Mr. Roy Read, the CEO of AMD. He made a net purchase of around 209,000 shares in August. Others bullish insiders include Kumar Devinder, Harry Wolin and Lisa Su.
AMD shares have fallen around 26% since the second quarter report. In July, shares traded higher, eclipsing a price of $4.65 per share. This decline should have investors flocking to the stock, as all analytical measures point out that now may be a good time to buy AMD. Additionally, it looks as though insiders may have seen potential in the company from its second quarter report.
AMD suffered a revenue decline of 17% year-on-year. It also reported a net loss of $65 million. However, its operating income was $2 million, compared with an operating loss of $38 million in quarter one. Its revenues increased 6% quarter-on-quarter. Its computing solutions segment revenue increased 12% sequentially. Apple (AAPL) announced that its newest Mac Pro will feature dual AMD FirePro™ graphics cards. For the third quarter, the company expects revenues to increase 22% quarter-on-quarter. This information made both hedge fund traders and insiders happy.
Delving into the fundamentals, AMD's price to sales ratio shows that the company is severely undervalued in comparison to its rivals in the semiconductor industry. AMD's price to sales ratio is 0.50. But investors are valuing the price to sales ratio of Intel (INTC) higher at 2.08. And the same can be said at 1.95 for IBM (IBM) and 2.01 for Nvidia (NVDA).
Not surprisingly, investors grossly undervalue the company's forward P/E of 23.81. It is considered more expensive going forward when looking at Nvidia (18.69), Intel (11.19) and IBM (10.01). AMD at a beta of 2.45 is considered more risky than Intel (0.84), Nvidia (1.69) and IBM (0.76).
In the long run, AMD's underestimation could be misleading. Its share price growth in the past three months has been about 36%, more favorable than 4.7% for Intel, - 2.17% for IBM and 17.6% for Nvidia. Additionally, its EPS growth in the next five years is estimated at 11.50%, higher than 11.00% for Intel and 9.96% for IBM. Nvidia, however, is higher than AMD at 12.00%.
AMD has been diversifying its business outside the slowing PC market. Its chips will be utilized in Microsoft's XBox One and Sony's Play Station 4 gaming consoles. Hedge fund traders and analysts are excited by this. Canaccord Genuity upgraded the stock from hold to buy with a price target of $5 a share. FBR Capital upgraded the stock from market perform to outperform, saying AMD may have a larger revenue opportunity by selling full microserver systems
The macroeconomic environment surrounding AMD is promising. According to the research firm IDC, the semiconductor revenues will grow 2.9% year-on-year in 2014 to $329 billion and log a compound annual growth rate of 4.2% from 2012 to 2017, reaching $366 billion in 2017.
To conclude, the simple idea I'm suggesting is that AMD is undervalued. But just because its price multiples have fallen does not mean we will see an acquisition. The company expects to reach new customers as it diversifies its business. Perhaps this is why insiders and hedge fund traders are sticking with the company for the long term.