Qualys Inc (QLYS): Hedge Funds Reversing Course

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Qualys Inc (NASDAQ:QLYS) based on that data.

Qualys Inc (NASDAQ:QLYS) investors should be aware of a decrease in activity from the world’s largest hedge funds lately. QLYS was in 17 hedge funds’ portfolios at the end of the first quarter of 2020. There were 29 hedge funds in our database with QLYS holdings at the end of the previous quarter. Our calculations also showed that QLYS isn’t among the 30 most popular stocks among hedge funds (click for Q1 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.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.


Lee Ainslie of Maverick Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s check out the key hedge fund action encompassing Qualys Inc (NASDAQ:QLYS).

How are hedge funds trading Qualys Inc (NASDAQ:QLYS)?

Heading into the second quarter of 2020, a total of 17 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -41% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in QLYS over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is QLYS A Good Stock To Buy?

More specifically, GLG Partners was the largest shareholder of Qualys Inc (NASDAQ:QLYS), with a stake worth $21.1 million reported as of the end of September. Trailing GLG Partners was Renaissance Technologies, which amassed a stake valued at $18.5 million. Portolan Capital Management, D E Shaw, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Portolan Capital Management allocated the biggest weight to Qualys Inc (NASDAQ:QLYS), around 2.56% of its 13F portfolio. Navellier & Associates is also relatively very bullish on the stock, designating 0.54 percent of its 13F equity portfolio to QLYS.

Because Qualys Inc (NASDAQ:QLYS) has experienced bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few fund managers that decided to sell off their positions entirely by the end of the first quarter. At the top of the heap, Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors dropped the largest investment of the 750 funds watched by Insider Monkey, valued at close to $5.8 million in stock. Richard Walters II’s fund, Stony Point Capital, also sold off its stock, about $3.5 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 12 funds by the end of the first quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Qualys Inc (NASDAQ:QLYS) but similarly valued. We will take a look at SL Green Realty Corp (NYSE:SLG), CAE, Inc. (NYSE:CAE), QTS Realty Trust Inc (NYSE:QTS), and Stag Industrial Inc (NYSE:STAG). This group of stocks’ market values match QLYS’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SLG 23 192086 -4
CAE 20 79383 10
QTS 21 365837 -2
STAG 15 79203 -3
Average 19.75 179127 0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $179 million. That figure was $116 million in QLYS’s case. SL Green Realty Corp (NYSE:SLG) is the most popular stock in this table. On the other hand Stag Industrial Inc (NYSE:STAG) is the least popular one with only 15 bullish hedge fund positions. Qualys Inc (NASDAQ:QLYS) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 13.4% in 2020 through June 22nd and surpassed the market by 15.9 percentage points. Unfortunately QLYS wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); QLYS investors were disappointed as the stock returned 18.6% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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