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Mimecast Limited (MIME): Hedge Funds Going Back and Forth

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Mimecast Limited (NASDAQ:MIME) and determine whether hedge funds skillfully traded this stock.

Mimecast Limited (NASDAQ:MIME) was in 34 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 39. MIME has experienced a decrease in hedge fund sentiment recently. There were 39 hedge funds in our database with MIME positions at the end of the first quarter. Our calculations also showed that MIME isn’t among the 30 most popular stocks among hedge funds (click for Q2 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Mark Kingdon - Kingdon Capital

Mark Kingdon of Kingdon Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world 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. With all of this in mind we’re going to go over the fresh hedge fund action surrounding Mimecast Limited (NASDAQ:MIME).

Hedge fund activity in Mimecast Limited (NASDAQ:MIME)

At the end of the second quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MIME over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Mimecast Limited (NASDAQ:MIME) was held by Point72 Asset Management, which reported holding $69.4 million worth of stock at the end of September. It was followed by Greenvale Capital with a $33.3 million position. Other investors bullish on the company included Marshall Wace LLP, Kingdon Capital, and Arrowstreet Capital. In terms of the portfolio weights assigned to each position Indaba Capital Management allocated the biggest weight to Mimecast Limited (NASDAQ:MIME), around 5.31% of its 13F portfolio. Greenvale Capital is also relatively very bullish on the stock, designating 5.13 percent of its 13F equity portfolio to MIME.

Seeing as Mimecast Limited (NASDAQ:MIME) has faced falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few funds that elected to cut their entire stakes by the end of the second quarter. At the top of the heap, Alex Sacerdote’s Whale Rock Capital Management cut the largest position of the 750 funds followed by Insider Monkey, worth an estimated $124.9 million in stock, and Colin Moran’s Abdiel Capital Advisors was right behind this move, as the fund dropped about $83.5 million worth. These moves are important to note, as aggregate hedge fund interest fell by 5 funds by the end of the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mimecast Limited (NASDAQ:MIME) but similarly valued. We will take a look at Brighthouse Financial, Inc. (NASDAQ:BHF), Diodes Incorporated (NASDAQ:DIOD), Manchester United PLC (NYSE:MANU), Green Dot Corporation (NYSE:GDOT), Advanced Energy Industries, Inc. (NASDAQ:AEIS), Acushnet Holdings Corp. (NYSE:GOLF), and Webster Financial Corporation (NYSE:WBS). This group of stocks’ market values are similar to MIME’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BHF 34 332550 9
DIOD 14 78957 1
MANU 11 35251 3
GDOT 23 700625 1
AEIS 21 81139 7
GOLF 11 31850 -1
WBS 30 245581 -3
Average 20.6 215136 2.4

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.6 hedge funds with bullish positions and the average amount invested in these stocks was $215 million. That figure was $257 million in MIME’s case. Brighthouse Financial, Inc. (NASDAQ:BHF) is the most popular stock in this table. On the other hand Manchester United PLC (NYSE:MANU) is the least popular one with only 11 bullish hedge fund positions. Mimecast Limited (NASDAQ:MIME) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MIME is 76.2. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on MIME, though not to the same extent, as the stock returned 18.2% since the end of June and outperformed the market as well.

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Disclosure: None. This article was originally published at Insider Monkey.