Do Hedge Funds Love Electronics For Imaging, Inc. (EFII)?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those successful funds in these small-cap stocks. In the following paragraphs, we analyze Electronics For Imaging, Inc. (NASDAQ:EFII) from the perspective of those successful funds.

Hedge fund interest in Electronics For Imaging, Inc. (NASDAQ:EFII) shares was flat at the end of last quarter. EFII was in 10 hedge funds’ portfolios at the end of September. This is usually a negative indicator. At the end of this article we will also compare EFII to other stocks including Paylocity Holding Corp (NASDAQ:PCTY), M/A-COM Technology Solutions Holdings (NASDAQ:MTSI), and Matador Resources Co (NYSE:MTDR) to get a better sense of its popularity.

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Hedge fund activity in Electronics For Imaging, Inc. (NASDAQ:EFII)

Heading into the fourth quarter of 2016, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, unchanged from the second quarter of 2016. On the other hand, there were a total of 14 hedge funds with a bullish position in EFII at the beginning of this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

HedgeFundSentimentChart

According to Insider Monkey’s hedge fund database, Eric Bannasch’s Cadian Capital holds the number one position in Electronics For Imaging, Inc. (NASDAQ:EFII) which has a $100.3 million position in the stock, comprising 5.3% of its 13F portfolio. On Cadian Capital’s heels is Nick Niell of Arrowgrass Capital Partners, with a $24.8 million position. Other members of the smart money with similar optimism include Phill Gross and Robert Atchinson’s Adage Capital Management, John Croghan and Richard Fradin’s Rail-Splitter Capital Management and Ira Unschuld’s Brant Point Investment Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that dumped their entire stakes in the stock during the third quarter. Interestingly, John Orrico’s Water Island Capital dumped the biggest investment of the 700 funds followed by Insider Monkey, totaling about $3.4 million in stock. Ken Griffin’s fund, Citadel Investment Group, also sold off its call options, about $0.2 million worth.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Electronics For Imaging, Inc. (NASDAQ:EFII) but similarly valued. These stocks are Paylocity Holding Corp (NASDAQ:PCTY), M/A-COM Technology Solutions Holdings (NASDAQ:MTSI), Matador Resources Co (NYSE:MTDR), and ACI Worldwide Inc (NASDAQ:ACIW). This group of stocks’ market valuations are closest to EFII’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PCTY 13 72004 4
MTSI 15 56196 0
MTDR 13 65490 1
ACIW 11 158644 -2

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $88 million. That figure was $158 million in EFII’s case. M/A-COM Technology Solutions Holdings (NASDAQ:MTSI) is the most popular stock in this table. On the other hand ACI Worldwide Inc (NASDAQ:ACIW) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Electronics For Imaging, Inc. (NASDAQ:EFII) is even less popular than ACIW. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.

Disclosure: None