Hedge Funds Making A Move Into Q2 Holdings Inc (QTWO)

Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third-most popular stock, lost 10% amid uncertainty regarding interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool to identify the next stock to invest in.


Is Q2 Holdings Inc (NYSE:QTWO) worth your attention right now? Investors who are in the know are in a bullish mood. The number of long hedge fund positions jumped by six recently. QTWO was in 22 hedge funds’ portfolio at the end of the third quarter of 2015. There were 16 hedge funds in our database with QTWO holdings at the end of the previous quarter. At the end of this article we will also compare QTWO to other stocks including LDR Holding Corp (NASDAQ:LDRH), Costamare Inc (NYSE:CMRE), and Krispy Kreme Doughnuts (NYSE:KKD) to get a better sense of its popularity.

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To the average investor there are a lot of signals shareholders use tograde publicly traded companies. A duo of the most under-the-radar signals are hedge fund and insider trading signals. Experts at hedge fund tracking site Insider Monkey have shown that, historically, those who follow the top picks of the top investment managers can outperform the market by a superb amount (see the details here).

With all of this in mind, we’re going to go over the fresh action encompassing Q2 Holdings Inc (NYSE:QTWO).

What have hedge funds been doing with Q2 Holdings Inc (NYSE:QTWO)?

Heading into Q4, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 38% increase from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings substantially.

Of the funds tracked by Insider Monkey, Richard Driehaus’ Driehaus Capital has the biggest position in Q2 Holdings Inc (NYSE:QTWO), worth close to $11.3 million, comprising 0.4% of its total 13F portfolio. Coming in second is Legg Mason Capital Management, which holds a $9.8 million position; 0.2% of its 13F portfolio is allocated to the company. Other members of the smart money with similar optimism include Nick Niell’s Arrowgrass Capital Partners, Jim Simons’ Renaissance Technologies, and Ken Griffin’s Citadel Investment Group.

As aggregate interest increased, some big names have been driving this bullishness. Arrowgrass Capital Partners initiated the most outsized position in Q2 Holdings Inc (NYSE:QTWO) and had $8.4 million invested in the company at the end of the quarter. Simon Sadler’s Segantii Capital also initiated a $3.6 million position during the quarter. The other funds with new positions in the stock are Anand Parekh’s Alyeska Investment Group, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Scott Fine and Peter Richards’ Empire Capital Management.

Let’s go over hedge fund activity in other stocks similar to Q2 Holdings Inc (NYSE:QTWO). We will take a look at LDR Holding Corp (NASDAQ:LDRH), Costamare Inc (NYSE:CMRE), Krispy Kreme Doughnuts (NYSE:KKD), and MDC Partners Inc. (USA) (NASDAQ:MDCA). This group of stocks’ market values are similar to QTWO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LDRH 11 100571 -3
CMRE 14 43111 -1
KKD 22 73389 -3
MDCA 25 267986 7

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $121 million, above the $71 million invested in Q2 Holdings. MDC Partners Inc. (USA) (NASDAQ:MDCA) is the most popular stock in this table. On the other hand LDR Holding Corp (NASDAQ:LDRH) is the least popular one with only 11 bullish hedge fund positions. Q2 Holdings Inc (NYSE:QTWO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are pouring a lot of money into. In this regard MDCA might be a better candidate to consider a long position in.