Hedge Funds Are Buying Qualys Inc (QLYS)

In this article we are going to use hedge fund sentiment as a tool and determine whether Qualys Inc (NASDAQ:QLYS) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.

Qualys Inc (NASDAQ:QLYS) was in 20 hedge funds’ portfolios at the end of June. The all time high for this statistic is 29. QLYS has seen an increase in support from the world’s most elite money managers recently. There were 12 hedge funds in our database with QLYS holdings at the end of March. Our calculations also showed that QLYS isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

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At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s take a glance at the fresh hedge fund action encompassing Qualys Inc (NASDAQ:QLYS).

Do Hedge Funds Think QLYS Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of 67% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in QLYS a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Fundsmith LLP, managed by Terry Smith, holds the largest position in Qualys Inc (NASDAQ:QLYS). Fundsmith LLP has a $107.4 million position in the stock, comprising 0.3% of its 13F portfolio. On Fundsmith LLP’s heels is Derek C. Schrier of Indaba Capital Management, with a $36.3 million position; 3.9% of its 13F portfolio is allocated to the stock. Remaining members of the smart money that are bullish encompass John Overdeck and David Siegel’s Two Sigma Advisors, Charles Montanaro’s Montanaro Asset Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Indaba Capital Management allocated the biggest weight to Qualys Inc (NASDAQ:QLYS), around 3.92% of its 13F portfolio. Montanaro Asset Management is also relatively very bullish on the stock, earmarking 1 percent of its 13F equity portfolio to QLYS.

Now, key money managers have been driving this bullishness. Millennium Management, managed by Israel Englander, created the biggest position in Qualys Inc (NASDAQ:QLYS). Millennium Management had $5.8 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also made a $2.1 million investment in the stock during the quarter. The other funds with brand new QLYS positions are Greg Eisner’s Engineers Gate Manager, Jinghua Yan’s TwinBeech Capital, and D. E. Shaw’s D E Shaw.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Qualys Inc (NASDAQ:QLYS) but similarly valued. We will take a look at EPR Properties (NYSE:EPR), F.N.B. Corp (NYSE:FNB), Alkermes Plc (NASDAQ:ALKS), Option Care Health, Inc. (NASDAQ:OPCH), Sabra Health Care REIT Inc (NASDAQ:SBRA), Glaukos Corporation (NYSE:GKOS), and Arconic Corporation (NYSE:ARNC). This group of stocks’ market valuations are similar to QLYS’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
EPR 20 231012 5
FNB 16 55892 0
ALKS 36 897660 5
OPCH 31 342676 0
SBRA 14 100037 -7
GKOS 19 51490 1
ARNC 30 1000061 4
Average 23.7 382690 1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $383 million. That figure was $215 million in QLYS’s case. Alkermes Plc (NASDAQ:ALKS) is the most popular stock in this table. On the other hand Sabra Health Care REIT Inc (NASDAQ:SBRA) is the least popular one with only 14 bullish hedge fund positions. Qualys Inc (NASDAQ:QLYS) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for QLYS is 44.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through October 22nd and still beat the market by 1.6 percentage points. A small number of hedge funds were also right about betting on QLYS as the stock returned 16.6% since the end of the second quarter (through 10/22) and outperformed the market by an even larger margin.

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