Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Mitek Systems, Inc. (NASDAQ:MITK)? The smart money sentiment can provide an answer to this question.
Is MITK a good stock to buy now? Mitek Systems, Inc. (NASDAQ:MITK) was in 20 hedge funds’ portfolios at the end of September. The all time high for this statistic is 21. MITK investors should be aware of an increase in support from the world’s most elite money managers in recent months. There were 19 hedge funds in our database with MITK holdings at the end of June. Our calculations also showed that MITK isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
At the moment there are many indicators shareholders can use to evaluate stocks. Two of the less utilized indicators are hedge fund and insider trading moves. We have shown that, historically, those who follow the best picks of the elite hedge fund managers can outclass the broader indices by a healthy amount (see the details here).
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Now let’s review the key hedge fund action encompassing Mitek Systems, Inc. (NASDAQ:MITK).
Do Hedge Funds Think MITK Is A Good Stock To Buy Now?
At third quarter’s end, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 17 hedge funds with a bullish position in MITK a year ago. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).
The largest stake in Mitek Systems, Inc. (NASDAQ:MITK) was held by Toronado Partners, which reported holding $38 million worth of stock at the end of September. It was followed by Blue Grotto Capital with a $21.9 million position. Other investors bullish on the company included Renaissance Technologies, Archon Capital Management, and Voss Capital. In terms of the portfolio weights assigned to each position Blue Grotto Capital allocated the biggest weight to Mitek Systems, Inc. (NASDAQ:MITK), around 10.79% of its 13F portfolio. Toronado Partners is also relatively very bullish on the stock, designating 10.59 percent of its 13F equity portfolio to MITK.
As one would reasonably expect, key money managers have been driving this bullishness. Voss Capital, managed by Travis Cocke, created the largest position in Mitek Systems, Inc. (NASDAQ:MITK). Voss Capital had $3.4 million invested in the company at the end of the quarter. Roger Ibbotson’s Zebra Capital Management also made a $0.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Paul Marshall and Ian Wace’s Marshall Wace LLP, Greg Eisner’s Engineers Gate Manager, and Donald Sussman’s Paloma Partners.
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 Universal Electronics Inc (NASDAQ:UEIC), Aptose Biosciences Inc (NASDAQ:APTO), 89bio, Inc. (NASDAQ:ETNB), Nordic American Tankers Ltd (NYSE:NAT), Schnitzer Steel Industries, Inc. (NASDAQ:SCHN), Rite Aid Corporation (NYSE:RAD), and Quotient Limited (NASDAQ:QTNT). This group of stocks’ market values are closest to MITK’s market value.
|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 15.7 hedge funds with bullish positions and the average amount invested in these stocks was $108 million. That figure was $89 million in MITK’s case. Quotient Limited (NASDAQ:QTNT) is the most popular stock in this table. On the other hand Universal Electronics Inc (NASDAQ:UEIC) is the least popular one with only 10 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. Our overall hedge fund sentiment score for MITK is 65.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on MITK as the stock returned 14.8% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.