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Monotype Imaging Holdings Inc. (TYPE): Hedge Funds Are Bullish and Insiders Are Bearish, What Should You Do?

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Is Monotype Imaging Holdings Inc. (NASDAQ:TYPE) a good investment now? Hedge funds are taking an optimistic view. The number of bullish hedge fund bets went up by 1 recently.

If you’d ask most stock holders, hedge funds are perceived as unimportant, old financial tools of years past. While there are greater than 8000 funds with their doors open today, we at Insider Monkey hone in on the masters of this club, about 450 funds. It is widely believed that this group has its hands on most of all hedge funds’ total asset base, and by monitoring their top stock picks, we have come up with a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).

Just as beneficial, optimistic insider trading activity is a second way to break down the marketplace. Just as you’d expect, there are lots of reasons for an insider to cut shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of empirical studies have demonstrated the market-beating potential of this tactic if you understand what to do (learn more here).

Consequently, it’s important to take a gander at the recent action surrounding Monotype Imaging Holdings Inc. (NASDAQ:TYPE).

Hedge fund activity in Monotype Imaging Holdings Inc. (NASDAQ:TYPE)

At Q1’s end, a total of 10 of the hedge funds we track were long in this stock, a change of 11% from the first quarter. With the smart money’s capital changing hands, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially.

Monotype Imaging Holdings Inc. (NASDAQ:TYPE)When looking at the hedgies we track, Chuck Royce’s Royce & Associates had the biggest position in Monotype Imaging Holdings Inc. (NASDAQ:TYPE), worth close to $34.8 million, comprising 0.1% of its total 13F portfolio. Coming in second is Douglas T. Granat of Trigran Investments, with a $9.4 million position; 4.8% of its 13F portfolio is allocated to the company. Some other hedgies that hold long positions include Lisa Rapuano’s Lane Five Capital, Jim Simons’s Renaissance Technologies and Matthew Hulsizer’s PEAK6 Capital Management.

With a general bullishness amongst the heavyweights, key money managers were leading the bulls’ herd. PEAK6 Capital Management, managed by Matthew Hulsizer, created the most outsized call position in Monotype Imaging Holdings Inc. (NASDAQ:TYPE). PEAK6 Capital Management had 3.9 million invested in the company at the end of the quarter.

How are insiders trading Monotype Imaging Holdings Inc. (NASDAQ:TYPE)?

Insider buying is most useful when the company in question has experienced transactions within the past six months. Over the latest 180-day time frame, Monotype Imaging Holdings Inc. (NASDAQ:TYPE) has seen zero unique insiders buying, and 9 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Monotype Imaging Holdings Inc. (NASDAQ:TYPE). These stocks are Jive Software Inc (NASDAQ:JIVE), Lifelock Inc (NYSE:LOCK), FleetMatics Group PLC (NYSE:FLTX), Imperva Inc (NYSE:IMPV), and Insight Enterprises, Inc. (NASDAQ:NSIT). All of these stocks are in the application software industry and their market caps match TYPE’s market cap.

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