Did Hedge Funds Drop The Ball On Mimecast Limited (MIME) ?

Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about Mimecast Limited (NASDAQ:MIME).

Mimecast Limited (NASDAQ:MIME) was in 23 hedge funds’ portfolios at the end of the fourth quarter of 2018. MIME shareholders have witnessed a decrease in support from the world’s most elite money managers recently. There were 26 hedge funds in our database with MIME positions at the end of the previous quarter. Our calculations also showed that MIME isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Sander Gerber of Hudson Bay Capital

We’re going to take a look at the latest hedge fund action encompassing Mimecast Limited (NASDAQ:MIME).

How are hedge funds trading Mimecast Limited (NASDAQ:MIME)?

At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -12% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MIME over the last 14 quarters. 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, managed by Colin Moran, holds the number one position in Mimecast Limited (NASDAQ:MIME). Abdiel Capital Advisors has a $185.6 million position in the stock, comprising 16.7% of its 13F portfolio. The second most bullish fund manager is Jim Simons of Renaissance Technologies, with a $55.2 million position; 0.1% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism encompass Alex Sacerdote’s Whale Rock Capital Management, Christopher Lyle’s SCGE Management and Brian Ashford-Russell and Tim Woolley’s Polar Capital.

Seeing as Mimecast Limited (NASDAQ:MIME) has faced falling interest from the smart money, it’s easy to see that there were a few funds who sold off their full holdings last quarter. Intriguingly, Principal Global Investors’s Columbus Circle Investors cut the largest stake of the 700 funds followed by Insider Monkey, valued at an estimated $30.8 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also dropped its stock, about $18.2 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds last quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Mimecast Limited (NASDAQ:MIME) but similarly valued. We will take a look at Colony Credit Real Estate, Inc. (NYSE:CLNC), Livent Corporation (NYSE:LTHM), CenterState Bank Corporation (NASDAQ:CSFL), and Acceleron Pharma Inc (NASDAQ:XLRN). This group of stocks’ market values match MIME’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CLNC 7 19539 3
LTHM 10 124151 10
CSFL 20 109125 1
XLRN 19 331684 -8
Average 14 146125 1.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $146 million. That figure was $428 million in MIME’s case. CenterState Bank Corporation (NASDAQ:CSFL) is the most popular stock in this table. On the other hand Colony Credit Real Estate, Inc. (NYSE:CLNC) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Mimecast Limited (NASDAQ:MIME) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on MIME as the stock returned 44.9% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

Disclosure: None. This article was originally published at Insider Monkey.