Should You Buy Mimecast Ltd (MIME)?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Mimecast Ltd (NASDAQ:MIME).

Is Mimecast Ltd (NASDAQ:MIME) worth your attention right now? Prominent investors are getting more bullish. During the third quarter, the number of investors from our database long the stock surged by 12. At the end of this article we will also compare MIME to other stocks including Diodes Incorporated (NASDAQ:DIOD), MacroGenics Inc (NASDAQ:MGNX), and Clayton Williams Energy, Inc. (NASDAQ:CWEI) 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.

With all of this in mind, let’s take a look at the new action regarding Mimecast Ltd (NASDAQ:MIME).

How have hedgies been trading Mimecast Ltd (NASDAQ:MIME)?

At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on Mimecast, compared to just three funds a quarter earlier. On the other hand, there were a total of 10 hedge funds with a bullish position in MIME at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Abdiel Capital Advisors, led by Colin Moran, holds the number one position in Mimecast Ltd (NASDAQ:MIME). Abdiel Capital Advisors has a $59.4 million position in the stock, comprising 17.5% of its 13F portfolio. Sitting at the No. 2 spot is George McCabe’s Portolan Capital Management, with a $9 million position; the fund has 1.2% of its 13F portfolio invested in the stock. 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, key hedge funds have been driving this bullishness. Richard Driehaus’ Driehaus Capital established the biggest position in Mimecast Ltd (NASDAQ:MIME). Driehaus Capital had $8.4 million invested in the company at the end of the quarter. Principal Global Investors’ Columbus Circle Investors also made a $7.1 million investment in the stock during the quarter. The following funds were also among the new MIME investors: Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Jim Simons’ Renaissance Technologies, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mimecast Ltd (NASDAQ:MIME) but similarly valued. We will take a look at Diodes Incorporated (NASDAQ:DIOD), MacroGenics Inc (NASDAQ:MGNX), Clayton Williams Energy, Inc. (NASDAQ:CWEI), and NCI Building Systems, Inc. (NYSE:NCS). This group of stocks’ market values resemble MIME’s market value.

As you can see these stocks had an average of 15 funds with bullish positions and the average amount invested in these stocks was $145 million. That figure was $103 million in MIME’s case. NCI Building Systems, Inc. (NYSE:NCS) is the most popular stock in this table with 23 funds holding shares. On the other hand Diodes Incorporated (NASDAQ:DIOD) is the least popular one with only eight bullish hedge fund positions. Mimecast Ltd (NASDAQ:MIME) is not the least popular stock in this group but hedge fund interest is close to average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard NCI Building Systems, Inc. (NYSE:NCS) might be a better candidate to consider taking a long position in.

Disclosure: none