Hedge Funds Are Buying VMware, Inc. (NYSE:VMW)

Is VMware, Inc. (NYSE:VMW) an exceptional stock to buy now? The smart money is getting more bullish. The number of bullish hedge fund bets inched up by 2 in recent months.

In the eyes of most traders, hedge funds are viewed as slow, old financial tools of the past. While there are over 8000 funds in operation today, we hone in on the masters of this group, about 450 funds. It is widely believed that this group controls the majority of the hedge fund industry’s total capital, and by monitoring their top equity investments, we have figured out a few investment strategies that have historically outperformed 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 began to sharing our picks with our subscribers at the end of August 2012, we have trumped the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

VMware, Inc. (NYSE:VMW)Just as beneficial, optimistic insider trading activity is a second way to break down the stock market universe. As the old adage goes: there are lots of motivations for a corporate insider to drop shares of his or her company, but only one, very simple reason why they would buy. Several empirical studies have demonstrated the useful potential of this tactic if “monkeys” know what to do (learn more here).

Now, it’s important to take a look at the recent action surrounding VMware, Inc. (NYSE:VMW).

What does the smart money think about VMware, Inc. (NYSE:VMW)?

At year’s end, a total of 32 of the hedge funds we track were long in this stock, a change of 7% from one quarter earlier. With hedgies’ sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially.

Of the funds we track, Brookside Capital, managed by Bain Capital, holds the biggest position in VMware, Inc. (NYSE:VMW). Brookside Capital has a $103 million position in the stock, comprising 2.3% of its 13F portfolio. Sitting at the No. 2 spot is GLG Partners, managed by Noam Gottesman, which held a $79 million position; the fund has 4% of its 13F portfolio invested in the stock. Remaining hedge funds with similar optimism include Steven Cohen’s SAC Capital Advisors, Glenn Russell Dubin’s Highbridge Capital Management and Jim Simons’s Renaissance Technologies.

Now, key hedge funds have jumped into VMware, Inc. (NYSE:VMW) headfirst. Highbridge Capital Management, managed by Glenn Russell Dubin, initiated the biggest position in VMware, Inc. (NYSE:VMW). Highbridge Capital Management had 77 million invested in the company at the end of the quarter. Scott Fine and Peter Richards’s Empire Capital Management also made a $15 million investment in the stock during the quarter. The other funds with new positions in the stock are Louis Bacon’s Moore Global Investments, Dmitry Balyasny’s Balyasny Asset Management, and SAC Subsidiary’s CR Intrinsic Investors.

What have insiders been doing with VMware, Inc. (NYSE:VMW)?

Insider trading activity, especially when it’s bullish, is most useful when the company we’re looking at has experienced transactions within the past 180 days. Over the last half-year time period, VMware, Inc. (NYSE:VMW) has seen 1 unique insiders purchasing, and 7 insider sales (see the details of insider trades here).

With the returns exhibited by our research, retail investors should always watch hedge fund and insider trading activity, and VMware, Inc. (NYSE:VMW) shareholders fit into this picture quite nicely.

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