SolarWinds Inc (NYSE:SWI): Are Hedge Funds Right About This Stock?

SolarWinds Inc (NYSE:SWI)SolarWinds Inc (NYSE:SWI) was in 19 hedge funds’ portfolio at the end of December. SWI has seen an increase in activity from the world’s largest hedge funds of late. There were 17 hedge funds in our database with SWI positions at the end of the previous quarter.

If you’d ask most investors, hedge funds are viewed as underperforming, outdated financial vehicles of the past. While there are over 8000 funds in operation today, we at Insider Monkey choose to focus on the upper echelon of this club, around 450 funds. It is widely believed that this group oversees the majority of the smart money’s total capital, and by paying attention to their highest performing investments, we have unearthed a few investment strategies that have historically outstripped the S&P 500 index. Our small-cap hedge fund strategy outstripped 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 topped the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Equally as integral, positive insider trading sentiment is a second way to break down the investments you’re interested in. As the old adage goes: there are a variety of reasons for a corporate insider to cut shares of his or her company, but just one, very simple reason why they would buy. Various academic studies have demonstrated the impressive potential of this tactic if shareholders understand what to do (learn more here).

Now, we’re going to take a gander at the latest action surrounding SolarWinds Inc (NYSE:SWI).

How are hedge funds trading SolarWinds Inc (NYSE:SWI)?

At the end of the fourth quarter, a total of 19 of the hedge funds we track were bullish in this stock, a change of 12% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially.

When looking at the hedgies we track, Jim Simons’s Renaissance Technologies had the largest position in SolarWinds Inc (NYSE:SWI), worth close to $73 million, accounting for 0.2% of its total 13F portfolio. The second largest stake is held by Scott McLellan of Marble Arch Investments, with a $52 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining hedge funds that hold long positions include Andrew Sandler’s Sandler Capital Management, Richard Driehaus’s Driehaus Capital and Ken Griffin’s Citadel Investment Group.

With a general bullishness amongst the heavyweights, specific money managers were breaking ground themselves. Ellington, managed by Mike Vranos, established the most outsized position in SolarWinds Inc (NYSE:SWI). Ellington had 0 million invested in the company at the end of the quarter. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s GRT Capital Partners also initiated a $0 million position during the quarter. The other funds with new positions in the stock are Glenn Russell Dubin’s Highbridge Capital Management, Joe DiMenna’s ZWEIG DIMENNA PARTNERS, and Mark A. Nordlicht’s Platinum Management.

How have insiders been trading SolarWinds Inc (NYSE:SWI)?

Insider buying is best served when the company in question has experienced transactions within the past half-year. Over the latest half-year time frame, SolarWinds Inc (NYSE:SWI) has experienced zero unique insiders purchasing, and 9 insider sales (see the details of insider trades here).

With the results exhibited by Insider Monkey’s time-tested strategies, retail investors should always pay attention to hedge fund and insider trading sentiment, and SolarWinds Inc (NYSE:SWI) is an important part of this process.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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