Is SolarWinds Inc (NYSE:SWI) a good investment now? Money managers are in a pessimistic mood. The number of long hedge fund bets shrunk by 4 recently.
To most stock holders, hedge funds are perceived as unimportant, outdated investment vehicles of yesteryear. While there are over 8000 funds with their doors open at the moment, we at Insider Monkey choose to focus on the top tier of this group, about 450 funds. It is estimated that this group controls the lion’s share of the smart money’s total asset base, and by tracking their best equity investments, we have figured out a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have topped the S&P 500 index by 23.3 percentage points in 8 months (see all of our picks from August).
Equally as key, optimistic insider trading activity is another way to parse down the marketplace. There are a number of reasons for an upper level exec to downsize shares of his or her company, but only one, very obvious reason why they would initiate a purchase. Several academic studies have demonstrated the valuable potential of this method if piggybackers understand where to look (learn more here).
Keeping this in mind, it’s important to take a glance at the key action regarding SolarWinds Inc (NYSE:SWI).
Hedge fund activity in SolarWinds Inc (NYSE:SWI)
At Q1’s end, a total of 17 of the hedge funds we track were bullish in this stock, a change of -19% from the previous quarter. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were boosting their stakes substantially.
According to our comprehensive database, Renaissance Technologies, managed by Jim Simons, holds the largest position in SolarWinds Inc (NYSE:SWI). Renaissance Technologies has a $84.6 million position in the stock, comprising 0.2% of its 13F portfolio. On Renaissance Technologies’s heels is Marble Arch Investments, managed by Scott McLellan, which held a $59.1 million position; 4.3% of its 13F portfolio is allocated to the company. Remaining peers with similar optimism include Lee Ainslie’s Maverick Capital, Richard Driehaus’s Driehaus Capital and Dmitry Balyasny’s Balyasny Asset Management.
Because SolarWinds Inc (NYSE:SWI) has experienced falling interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few money managers that slashed their entire stakes in Q1. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital cut the largest stake of the 450+ funds we watch, worth close to $2.7 million in stock., and Matthew Tewksbury of Stevens Capital Management was right behind this move, as the fund dropped about $2.1 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 4 funds in Q1.
What have insiders been doing with SolarWinds Inc (NYSE:SWI)?
Insider trading activity, especially when it’s bullish, is most useful when the primary stock in question has seen transactions within the past half-year. Over the last 180-day time frame, SolarWinds Inc (NYSE:SWI) has seen zero unique insiders buying, and 8 insider sales (see the details of insider trades here).
Let’s go over hedge fund and insider activity in other stocks similar to SolarWinds Inc (NYSE:SWI). These stocks are CommVault Systems, Inc. (NASDAQ:CVLT), Fortinet Inc (NASDAQ:FTNT), Cadence Design Systems Inc (NASDAQ:CDNS), Splunk Inc (NASDAQ:SPLK), and Msci Inc (NYSE:MSCI). This group of stocks are in the application software industry and their market caps are closest to SWI’s market cap.