How Guidance Software, Inc. (GUID) Stacks Up Against Its Peers

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Is Guidance Software, Inc. (NASDAQ:GUID) an outstanding investment today? The best stock pickers are categorically getting less optimistic. The number of long hedge fund bets that are revealed through the 13F filings experienced a decline of 2 recently. In this way, there were 7 hedge funds in our database with GUID holdings at the end of the previous quarter. At the end of this article we will also compare GUID to other stocks including DURECT Corporation (NASDAQ:DRRX), Hallmark Financial Services, Inc. (NASDAQ:HALL), and Deutsche Multi-Market Income Trust (NYSE:KMM) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

What does the smart money think about Guidance Software, Inc. (NASDAQ:GUID)?

At Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, a drop of 22% from one quarter earlier. On the other hand, there were a total of 9 hedge funds with a bullish position in GUID 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.

When looking at the institutional investors followed by Insider Monkey, Robert G. Moses’ RGM Capital has the number one position in Guidance Software, Inc. (NASDAQ:GUID), worth close to $23.1 million, accounting for 2.6% of its total 13F portfolio. The second most bullish fund manager is Douglas Dossey and Arthur Young of Tensile Capital which holds a $7.4 million position; the fund has 1.7% of its 13F portfolio invested in the stock. Remaining peers that are bullish encompass Renaissance Technologies, one of the largest hedge funds in the world, Charles Frumberg’s Emancipation Capital and Mario Gabelli’s GAMCO Investors. We should note that two of these hedge funds (RGM Capital and Tensile Capital) 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.

Seeing as Guidance Software, Inc. (NASDAQ:GUID) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedge funds that decided to sell off their entire stakes last quarter. At the top of the heap, George McCabe’s Portolan Capital Management cashed in the largest position of all the investors tracked by Insider Monkey, valued at close to $1.2 million in stock, and Peter Algert and Kevin Coldiron’s Algert Coldiron Investors was right behind this move, as the fund cut about $0.2 million worth of shares.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Guidance Software, Inc. (NASDAQ:GUID) but similarly valued. These stocks are DURECT Corporation (NASDAQ:DRRX), Hallmark Financial Services, Inc. (NASDAQ:HALL), Deutsche Multi-Market Income Trust (NYSE:KMM), and Oppenheimer Holdings Inc. (USA) (NYSE:OPY). This group of stocks’ market values resemble GUID’s market value.

As you can see these stocks had an average of 5 hedge funds with bullish positions and the average amount invested in these stocks was $19 million. That figure was $38 million in GUID’s case. DURECT Corporation (NASDAQ:DRRX) is the most popular stock in this table. On the other hand Hallmark Financial Services, Inc. (NASDAQ:HALL) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Guidance Software, Inc. (NASDAQ:GUID) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None