Is Mitek Systems, Inc. (NASDAQ:MITK) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Mitek Systems, Inc. (NASDAQ:MITK) has seen an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that mitk isn’t among the 30 most popular stocks among hedge funds.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
Let’s check out the new hedge fund action regarding Mitek Systems, Inc. (NASDAQ:MITK).
How are hedge funds trading Mitek Systems, Inc. (NASDAQ:MITK)?
At Q3’s end, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of 9% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in MITK over the last 13 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Mitek Systems, Inc. (NASDAQ:MITK) was held by AQR Capital Management, which reported holding $5.5 million worth of stock at the end of September. It was followed by Prescott Group Capital Management with a $3.8 million position. Other investors bullish on the company included P.A.W. CAPITAL PARTNERS, Elliott Management, and Renaissance Technologies.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Elliott Management, managed by Paul Singer, initiated the most valuable position in Mitek Systems, Inc. (NASDAQ:MITK). Elliott Management had $2.1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $1 million investment in the stock during the quarter. The only other fund with a brand new MITK position is Brian C. Freckmann’s Lyon Street Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Mitek Systems, Inc. (NASDAQ:MITK) but similarly valued. We will take a look at Ocular Therapeutix Inc (NASDAQ:OCUL), Overseas Shipholding Group, Inc. (NYSE:OSG), Reis Inc (NASDAQ:REIS), and Amber Road Inc (NYSE:AMBR). This group of stocks’ market caps resemble MITK’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 9 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $19 million in MITK’s case. Overseas Shipholding Group, Inc. (NYSE:OSG) is the most popular stock in this table. On the other hand Reis Inc (NASDAQ:REIS) is the least popular one with only 7 bullish hedge fund positions. Mitek Systems, Inc. (NASDAQ:MITK) 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 piling on. In this regard OSG might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.