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Sourcefire, Inc. (NASDAQ:FIRE): Are Hedge Funds Right About This Stock? – KEYW Holding Corp. (NASDAQ:KEYW), Brady Corp (NYSE:BRC)

Sourcefire, Inc. (NASDAQ:FIRE) shareholders have witnessed a decrease in enthusiasm from smart money lately.

According to most traders, hedge funds are assumed to be unimportant, outdated investment tools of the past. While there are over 8000 funds with their doors open today, we look at the aristocrats of this group, around 450 funds. Most estimates calculate that this group oversees most of the hedge fund industry’s total asset base, and by monitoring their top stock picks, we have identified a few investment strategies that have historically beaten the S&P 500 index. 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 started sharing our picks with our subscribers at the end of August 2012, we have outpaced the S&P 500 index by 25 percentage points in 6.5 month (check out a sample of our picks).

Sourcefire, Inc. (NASDAQ:FIRE)

Equally as key, optimistic insider trading sentiment is a second way to break down the marketplace. As the old adage goes: there are lots of stimuli for an upper level exec to get rid of shares of his or her company, but just one, very clear reason why they would initiate a purchase. Several empirical studies have demonstrated the valuable potential of this tactic if “monkeys” understand where to look (learn more here).

With these “truths” under our belt, we’re going to take a peek at the recent action regarding Sourcefire, Inc. (NASDAQ:FIRE).

What does the smart money think about Sourcefire, Inc. (NASDAQ:FIRE)?

At year’s end, a total of 14 of the hedge funds we track were long in this stock, a change of -13% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few noteworthy hedge fund managers who were increasing their stakes substantially.

Of the funds we track, Israel Englander’s Millennium Management had the biggest position in Sourcefire, Inc. (NASDAQ:FIRE), worth close to $9 million, comprising 0.1% of its total 13F portfolio. On Millennium Management’s heels is Polar Capital, managed by Brian Ashford-Russell and Tim Woolley, which held a $7 million position; 0.3% of its 13F portfolio is allocated to the company. Other hedgies that hold long positions include Van Schreiber’s Bennett Lawrence Management, Anand Parekh’s Alyeska Investment Group and Scott Burney’s Bluefin Investment Management.

Because Sourcefire, Inc. (NASDAQ:FIRE) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there was a specific group of money managers who were dropping their full holdings in Q4. It’s worth mentioning that Charles Clough’s Clough Capital Partners dumped the largest stake of the 450+ funds we key on, totaling an estimated $13 million in stock., and John Thaler of JAT Capital Management was right behind this move, as the fund said goodbye to about $7 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 2 funds in Q4.

What do corporate executives and insiders think about Sourcefire, Inc. (NASDAQ:FIRE)?

Insider buying is most useful when the company in focus has experienced transactions within the past half-year. Over the last six-month time period, Sourcefire, Inc. (NASDAQ:FIRE) has experienced zero unique insiders buying, and 9 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to Sourcefire, Inc. (NASDAQ:FIRE). These stocks are Intralinks Holdings Inc (NYSE:IL), KEYW Holding Corp. (NASDAQ:KEYW), AsiaInfo-Linkage, Inc. (NASDAQ:ASIA), Mantech International Corp (NASDAQ:MANT), and Brady Corp (NYSE:BRC). This group of stocks are in the security software & services industry and their market caps are similar to FIRE’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Intralinks Holdings Inc (NYSE:IL) 15 0 0
KEYW Holding Corp. (NASDAQ:KEYW) 4 0 2
AsiaInfo-Linkage, Inc. (NASDAQ:ASIA) 9 0 0
Mantech International Corp (NASDAQ:MANT) 11 0 2
Brady Corp (NYSE:BRC) 13 0 9

With the returns exhibited by Insider Monkey’s studies, everyday investors should always watch hedge fund and insider trading activity, and Sourcefire, Inc. (NASDAQ:FIRE) applies perfectly to this mantra.

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

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.

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