Mercury Systems Inc (MRCY): Hedge Funds Are Bearish and Insiders Are Bullish, What Should You Do?

Mercury Systems Inc (NASDAQ:MRCY) was in 7 hedge funds’ portfolio at the end of the fourth quarter of 2012. MRCY investors should be aware of a decrease in hedge fund sentiment in recent months. There were 10 hedge funds in our database with MRCY holdings at the end of the previous quarter.

In the eyes of most stock holders, hedge funds are assumed to be worthless, outdated investment tools of yesteryear. While there are greater than 8000 funds in operation at present, we at Insider Monkey look at the top tier of this club, around 450 funds. It is estimated that this group oversees most of the hedge fund industry’s total asset base, and by keeping an eye on their top stock picks, we have figured out a few investment strategies that have historically outstripped Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as beneficial, bullish insider trading activity is a second way to break down the financial markets. There are a number of motivations for a bullish insider to get rid of shares of his or her company, but only one, very simple reason why they would behave bullishly. Various academic studies have demonstrated the impressive potential of this strategy if “monkeys” understand what to do (learn more here).

Keeping this in mind, let’s take a peek at the latest action surrounding Mercury Systems Inc (NASDAQ:MRCY).

How are hedge funds trading Mercury Systems Inc (NASDAQ:MRCY)?

At the end of the fourth quarter, a total of 7 of the hedge funds we track were long in this stock, a change of -30% from the third quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were boosting their holdings significantly.

When looking at the hedgies we track, Royce & Associates, managed by Chuck Royce, holds the largest position in Mercury Systems Inc (NASDAQ:MRCY). Royce & Associates has a $18.9 million position in the stock, comprising 0.1% of its 13F portfolio. Coming in second is George Soros of Soros Fund Management, with a $12.1 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Jim Simons’s Renaissance Technologies, Mario Gabelli’s GAMCO Investors and Charles Davidson’s Wexford Capital.

Mercury Systems Inc (NASDAQ:MRCY)Judging by the fact that Mercury Systems Inc (NASDAQ:MRCY) has faced falling interest from the smart money, we can see that there was a specific group of funds that elected to cut their positions entirely last quarter. Interestingly, “Richard S. Meisenberg’s ACK Asset Management dumped the largest investment of the 450+ funds we watch, totaling about $3.7 million in stock., and Joel Greenblatt of Gotham Asset Management was right behind this move, as the fund said goodbye to about $1.3 million worth. These moves are interesting, as total hedge fund interest fell by 3 funds last quarter.

What do corporate executives and insiders think about Mercury Systems Inc (NASDAQ:MRCY)?

Bullish insider trading is most useful when the company in question has experienced transactions within the past six months. Over the latest half-year time frame, Mercury Systems Inc (NASDAQ:MRCY) has experienced 1 unique insiders buying, and 5 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Mercury Systems Inc (NASDAQ:MRCY). These stocks are Identive Group, Inc. (NASDAQ:INVE), Intermec Inc. (NYSE:IN), Key Tronic Corporation (NASDAQ:KTCC), Acorn Energy Inc (NASDAQ:ACFN), and Immersion Corporation (NASDAQ:IMMR). All of these stocks are in the computer peripherals industry and their market caps resemble MRCY’s market cap.