SciQuest, Inc. (NASDAQ:SQI) investors should be aware of a decrease in hedge fund interest in recent months.
If you'd ask most market participants, hedge funds are seen as slow, outdated financial vehicles of yesteryear. While there are more than 8000 funds with their doors open at the moment, we at Insider Monkey choose to focus on the masters of this club, around 450 funds. It is estimated that this group oversees the majority of the hedge fund industry's total asset base, and by paying attention to their best investments, we have deciphered a number of investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points a year 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 beaten the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Just as important, optimistic insider trading sentiment is a second way to break down the marketplace. Obviously, there are plenty of incentives for a bullish insider to cut shares of his or her company, but just one, very obvious reason why they would behave bullishly. Plenty of academic studies have demonstrated the useful potential of this strategy if shareholders understand where to look (learn more here).
Consequently, let's take a glance at the recent action surrounding SciQuest, Inc. (NASDAQ:SQI).
At Q1's end, a total of 7 of the hedge funds we track held long positions in this stock, a change of 0% from the first quarter. With hedge funds' capital changing hands, there exists a few key hedge fund managers who were upping their stakes significantly.
Of the funds we track, Renaissance Technologies, managed by Jim Simons, holds the biggest position in SciQuest, Inc. (NASDAQ:SQI). Renaissance Technologies has a $9 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Royce & Associates, managed by Chuck Royce, which held a $7.7 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Brian Ashford-Russell and Tim Woolley's Polar Capital, Panayotis Takis Sparaggis's Alkeon Capital Management and Richard Driehaus's Driehaus Capital.
Seeing as SciQuest, Inc. (NASDAQ:SQI) has experienced falling interest from the aggregate hedge fund industry, it's safe to say that there is a sect of money managers that slashed their positions entirely heading into Q2. It's worth mentioning that Israel Englander's Millennium Management said goodbye to the largest stake of the 450+ funds we key on, valued at close to $0.5 million in stock., and Ken Griffin of Citadel Investment Group was right behind this move, as the fund sold off about $0.3 million worth. These bearish behaviors are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Bullish insider trading is best served when the company in focus has seen transactions within the past six months. Over the last 180-day time frame, SciQuest, Inc. (NASDAQ:SQI) has seen zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).
Let's also review hedge fund and insider activity in other stocks similar to SciQuest, Inc. (NASDAQ:SQI). These stocks are E2open Inc (NASDAQ:EOPN), AutoNavi Holdings Ltd (ADR) (NASDAQ:AMAP), Proofpoint Inc (NASDAQ:PFPT), Bazaarvoice Inc (NASDAQ:BV), and Accelrys, Inc. (NASDAQ:ACCL). All of these stocks are in the application software industry and their market caps match SQI's market cap.