Hedge Funds Aren’t Crazy About Digital River, Inc. (DRIV) Anymore

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Is Digital River, Inc. (NASDAQ:DRIV) a good investment?

To many investors, hedge funds are viewed as bloated, old investment tools of a period lost to current times. Although there are In excess of 8,000 hedge funds trading in present day, this site focuses on the aristocrats of this club, close to 525 funds. It is assumed that this group oversees most of the hedge fund industry’s total assets, and by keeping an eye on their best equity investments, we’ve revealed a number of investment strategies that have historically outstripped the S&P 500. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually 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 outclassed the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Just as key, positive insider trading sentiment is another way to analyze the investments you’re interested in. As the old adage goes: there are lots of motivations for a bullish insider to downsize shares of his or her company, but just one, very clear reason why they would buy. Many academic studies have demonstrated the market-beating potential of this tactic if you understand what to do (learn more here).

Digital River, Inc. (NASDAQ:DRIV)

What’s more, it’s important to analyze the newest info surrounding Digital River, Inc. (NASDAQ:DRIV).

Hedge fund activity in Digital River, Inc. (NASDAQ:DRIV)

Heading into Q3, a total of 7 of the hedge funds we track were long in this stock, a change of -42% from the first quarter. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were boosting their holdings significantly.

Out of the hedge funds we follow, Jim Simons’s Renaissance Technologies had the largest position in Digital River, Inc. (NASDAQ:DRIV), worth close to $15.3 million, comprising less than 0.1%% of its total 13F portfolio. Coming in second is Cliff Asness of AQR Capital Management, with a $4.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other hedge funds with similar optimism include Ken Griffin’s Citadel Investment Group, John Overdeck and David Siegel’s Two Sigma Advisors and D. E. Shaw’s D E Shaw.

Judging by the fact that Digital River, Inc. (NASDAQ:DRIV) has experienced dropping sentiment from the top-tier hedge fund industry, it’s easy to see that there was a specific group of fund managers that elected to cut their full holdings last quarter. At the top of the heap, Steven Cohen’s SAC Capital Advisors sold off the largest position of all the hedgies we key on, worth about $3.1 million in stock. Israel Englander’s fund, Millennium Management, also dropped its stock, about $1.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 5 funds last quarter.

How are insiders trading Digital River, Inc. (NASDAQ:DRIV)?

Insider buying is particularly usable when the company in focus has experienced transactions within the past six months. Over the latest 180-day time period, Digital River, Inc. (NASDAQ:DRIV) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Digital River, Inc. (NASDAQ:DRIV). These stocks are ClickSoftware Technologies Ltd. (NASDAQ:CKSW), QuinStreet Inc (NASDAQ:QNST), Vocus, Inc. (NASDAQ:VOCS), Demand Media Inc (NYSE:DMD), and InterNAP Network Services (NASDAQ:INAP). This group of stocks are in the internet software & services industry and their market caps are closest to DRIV’s market cap.

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