Hedge Funds Love MicroStrategy Incorporated (MSTR), But Not Quite As Much

The 700+ hedge funds and money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the third quarter, which unveil their equity positions as of September 30. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund positions. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards MicroStrategy Incorporated (NASDAQ:MSTR).

Is MicroStrategy Incorporated (NASDAQ:MSTR) an attractive investment right now? Money managers are becoming less hopeful. The number of bullish hedge fund positions were cut by 3 lately. MSTR was in 23 hedge funds’ portfolios at the end of September. There were 26 hedge funds in our database with MSTR holdings at the end of the previous quarter. At the end of this article we will also compare MSTR to other stocks including Rexnord Corp (NYSE:RXN), Watts Water Technologies Inc (NYSE:WTS), and Pretium Resources Inc (NYSE:PVG) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

How have hedgies been trading MicroStrategy Incorporated (NASDAQ:MSTR)?

At the end of the third quarter, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a drop of 12% from the second quarter of 2016, as hedge fund ownership of MSTR falls to its lowest point in 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings significantly (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Eminence Capital, managed by Ricky Sandler, holds the largest position in MicroStrategy Incorporated (NASDAQ:MSTR). According to regulatory filings, the fund has a $121.7 million position in the stock, comprising 2% of its 13F portfolio. The second largest stake is held by Glenhill Advisors, led by Glenn J. Krevlin, holding an $88.1 million position; 5.3% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism encompass Joel Greenblatt’s Gotham Asset Management, Leon Shaulov’s Maplelane Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.

Judging by the fact that MicroStrategy Incorporated (NASDAQ:MSTR) has experienced declining sentiment from hedge fund managers, logic holds that there exists a select few hedge funds that decided to sell off their full holdings heading into Q4. At the top of the heap, First Eagle Investment Management cut the largest investment of the “upper crust” of funds followed by Insider Monkey, worth about $65.9 million in stock, and Alex Sacerdote’s Whale Rock Capital Management was right behind this move, as the fund dumped about $33.2 million worth of MSTR shares. These bearish behaviors are interesting, as total hedge fund interest fell by 3 funds heading into Q4.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as MicroStrategy Incorporated (NASDAQ:MSTR) but similarly valued. We will take a look at Rexnord Corp (NYSE:RXN), Watts Water Technologies Inc (NYSE:WTS), Pretium Resources Inc (NYSE:PVG), and Dorman Products Inc. (NASDAQ:DORM). All of these stocks’ market caps resemble MSTR’s market cap.

As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $307 million in MSTR’s case. Rexnord Corp (NYSE:RXN) is the most popular stock in this table. On the other hand Dorman Products Inc. (NASDAQ:DORM) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks MicroStrategy Incorporated (NASDAQ:MSTR) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio, bearing in mind the recent decline in ownership among successful investors.

Disclosure: None