Brocade Communications Systems, Inc. (NASDAQ:BRCD) shareholders have witnessed a decrease in hedge fund interest in recent months.
If you’d ask most investors, hedge funds are viewed as unimportant, outdated investment tools of yesteryear. While there are more than 8000 funds with their doors open at present, we at Insider Monkey hone in on the masters of this group, close to 450 funds. It is widely believed that this group oversees the majority of all hedge funds’ total capital, and by watching their highest performing investments, we have brought to light a few investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a 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 outclassed the S&P 500 index by 24 percentage points in 7 months (see the details here).
Just as integral, optimistic insider trading sentiment is another way to parse down the stock market universe. There are lots of reasons for an executive to downsize shares of his or her company, but just one, very obvious reason why they would initiate a purchase. Various academic studies have demonstrated the useful potential of this strategy if you know what to do (learn more here).
Consequently, we’re going to take a glance at the recent action regarding Brocade Communications Systems, Inc. (NASDAQ:BRCD).
Hedge fund activity in Brocade Communications Systems, Inc. (NASDAQ:BRCD)
At year’s end, a total of 21 of the hedge funds we track were bullish in this stock, a change of -5% from one quarter earlier. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes considerably.
According to our comprehensive database, Elliott Management, managed by Paul Singer, holds the biggest position in Brocade Communications Systems, Inc. (NASDAQ:BRCD). Elliott Management has a $80.5 million position in the stock, comprising 2.5% of its 13F portfolio. On Elliott Management’s heels is AQR Capital Management, managed by Cliff Asness, which held a $73.1 million position; the fund has 0.3% of its 13F portfolio invested in the stock. Remaining hedge funds that hold long positions include Ken Griffin’s Citadel Investment Group, Jim Simons’s Renaissance Technologies and David Dreman’s Dreman Value Management.
Because Brocade Communications Systems, Inc. (NASDAQ:BRCD) has witnessed falling interest from the smart money, it’s safe to say that there is a sect of hedgies who sold off their entire stakes last quarter. Interestingly, Ray Dalio’s Bridgewater Associates cut the biggest stake of all the hedgies we key on, valued at close to $1.3 million in stock., and Philippe Jabre of Jabre Capital Partners was right behind this move, as the fund dumped about $1.2 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 1 funds last quarter.
How have insiders been trading Brocade Communications Systems, Inc. (NASDAQ:BRCD)?
Insider purchases made by high-level executives is best served when the company in question has experienced transactions within the past six months. Over the latest half-year time frame, Brocade Communications Systems, Inc. (NASDAQ:BRCD) has experienced zero unique insiders purchasing, and 3 insider sales (see the details of insider trades here).
Let’s also examine hedge fund and insider activity in other stocks similar to Brocade Communications Systems, Inc. (NASDAQ:BRCD). These stocks are Seagate Technology PLC (NASDAQ:STX), NetApp Inc. (NASDAQ:NTAP), Western Digital Corp. (NASDAQ:WDC), Emulex Corporation (NYSE:ELX), and Fusion-IO, Inc. (NYSE:FIO). All of these stocks are in the data storage devices industry and their market caps are similar to BRCD’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Seagate Technology PLC (NASDAQ:STX) | 22 | 0 | 18 |
| NetApp Inc. (NASDAQ:NTAP) | 49 | 0 | 4 |
| Western Digital Corp. (NASDAQ:WDC) | 30 | 0 | 9 |
| Emulex Corporation (NYSE:ELX) | 17 | 2 | 5 |
| Fusion-IO, Inc. (NYSE:FIO) | 20 | 0 | 10 |
With the results demonstrated by Insider Monkey’s studies, everyday investors should always monitor hedge fund and insider trading sentiment, and Brocade Communications Systems, Inc. (NASDAQ:BRCD) is an important part of this process.
