Is Demandware Inc (NYSE:DWRE) a safe stock to buy now? Investors who are in the know are becoming more confident. The number of bullish hedge fund bets rose by 2 in recent months.
To most traders, hedge funds are assumed to be underperforming, outdated financial tools of yesteryear. While there are more than 8000 funds in operation today, we choose to focus on the bigwigs of this club, about 450 funds. Most estimates calculate that this group has its hands on most of the hedge fund industry's total capital, and by paying attention to their highest performing investments, we have figured out a number of investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per 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 outpaced the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Just as integral, bullish insider trading sentiment is a second way to break down the investments you're interested in. Obviously, there are many reasons for an insider to get rid of shares of his or her company, but only one, very obvious reason why they would buy. Various academic studies have demonstrated the market-beating potential of this method if investors understand what to do (learn more here).
With these "truths" under our belt, let's take a peek at the latest action encompassing Demandware Inc (NYSE:DWRE).
In preparation for this quarter, a total of 6 of the hedge funds we track were bullish in this stock, a change of 50% from one quarter earlier. With the smart money's capital changing hands, there exists a few key hedge fund managers who were increasing their holdings considerably.
Of the funds we track, Brett Barakett's Tremblant Capital had the most valuable position in Demandware Inc (NYSE:DWRE), worth close to $11 million, comprising 0.5% of its total 13F portfolio. The second largest stake is held by Cupps Capital Management, managed by Drew Cupps, which held a $4.4 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Remaining hedge funds with similar optimism include Brad Gerstner's Altimeter Capital Management, John A. Levin's Levin Capital Strategies and D. E. Shaw's D E Shaw.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Altimeter Capital Management, managed by Brad Gerstner, established the most valuable position in Demandware Inc (NYSE:DWRE). Altimeter Capital Management had 1.4 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also made a $0.3 million investment in the stock during the quarter. The only other fund with a new position in the stock is Matthew Hulsizer's PEAK6 Capital Management.
Insider purchases made by high-level executives is best served when the company in question has experienced transactions within the past half-year. Over the last half-year time frame, Demandware Inc (NYSE:DWRE) has seen zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).
Let's go over hedge fund and insider activity in other stocks similar to Demandware Inc (NYSE:DWRE). These stocks are FleetMatics Group PLC (NYSE:FLTX), Lifelock Inc (NYSE:LOCK), BroadSoft Inc (NASDAQ:BSFT), PROS Holdings, Inc. (NYSE:PRO), and AVG Technologies NV (NYSE:AVG). All of these stocks are in the application software industry and their market caps resemble DWRE's market cap.