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Is Aerohive Networks Inc (HIVE) A Good Stock To Buy?

Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.

Aerohive Networks Inc (NYSE:HIVE) was in 7 hedge funds’ portfolios at the end of the third quarter of 2015. Aerohive Networks Inc (NYSE:HIVE) has experienced a decrease in enthusiasm from smart money recently. There were 8 hedge funds in our database with Aerohive Networks Inc (NYSE:HIVE) holdings at the end of the previous quarter. A similar sentiment was visible in the trading space, with the stock losing 14.33% value throughout the quarter. We will try to find out more about the hedge funds that held stake in Aerohive Networks Inc (NYSE:HIVE) at the end of September.

At the end of this article, we will also compare Aerohive Networks Inc (NYSE:HIVE) to other stocks, including Genco Shipping & Trading Limited (NYSE:GNK), Peoples Utah Bancorp (NASDAQ:PUB), and Permian Basin Royalty Trust (NYSE:PBT) to get a better sense of its popularity.

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If you’d ask most market participants, hedge funds are viewed as worthless, outdated financial tools of the past. While there are more than 8000 funds in operation today, We look at the leaders of this group, around 700 funds. Most estimates calculate that this group of people controls the majority of the smart money’s total asset base, and by shadowing their unrivaled stock picks, Insider Monkey has brought to light several investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per annum for a decade in their back tests.

With all of this in mind, let’s take a look at the fresh action encompassing Aerohive Networks Inc (NYSE:HIVE).

Hedge fund activity in Aerohive Networks Inc (NYSE:HIVE)

At the end of the third quarter, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a decline of 13% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Discovery Group, managed by Michael Murphy and Daniel Donoghue, holds the largest position in Aerohive Networks Inc (NYSE:HIVE). Discovery Group has a $22.2 million position in the stock, comprising 7.6% of its 13F portfolio. On Discovery Group’s heels is LG Capital Management, managed by Andrew Grossman and Michael Levitt, which holds a $3 million position; the fund has 1.4% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions include Ken Griffin’s Citadel Investment Group, Renaissance Technologies, and Chuck Royce’s Royce & Associates.

Seeing as Aerohive Networks Inc (NYSE:HIVE) has experienced a falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of funds that decided to sell off their entire stakes last quarter. It’s worth mentioning that Israel Englander’s Millennium Management said goodbye to the largest position of the “upper crust” of funds monitored by Insider Monkey, totaling close to $0.2 million in stock, and D E Shaw was right behind this move, as the fund dumped about $0.1 million worth of shares. These bearish behaviors are interesting, as total hedge fund interest fell by 1 fund last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Aerohive Networks Inc (NYSE:HIVE) but similarly valued. These stocks are Genco Shipping & Trading Limited (NYSE:GNK), Peoples Utah Bancorp (NASDAQ:PUB), Permian Basin Royalty Trust (NYSE:PBT), and NextPoint Residential Trust Inc (NYSE:NXRT). This group of stocks’ market caps are similar to Aerohive Networks Inc (NYSE:HIVE)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GNK 10 106210 10
PUB 6 11313 -3
PBT 5 16026 -2
NXRT 7 36265 0

As you can see, these stocks had an average of 7 hedge funds with bullish positions and the average amount invested in these stocks was $42 million. That figure was $29 million in Aerohive Networks Inc (NYSE:HIVE)’s case. Genco Shipping & Trading Limited (NYSE:GNK) is the most popular stock in this table. On the other hand, Permian Basin Royalty Trust (NYSE:PBT) is the least popular one with only 5 bullish hedge fund positions. Aerohive Networks Inc (NYSE:HIVE) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard, Genco Shipping & Trading Limited (NYSE:GNK) might be a better candidate to consider a long position.

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