Is ScanSource, Inc. (NASDAQ:SCSC) a buy here? Investors who are in the know are taking an optimistic view. The number of long hedge fund positions inched up by 6 in recent months.
To most stock holders, hedge funds are seen as underperforming, old financial tools of the past. While there are over 8000 funds trading today, we at Insider Monkey look at the elite of this club, about 450 funds. It is widely believed that this group oversees the lion’s share of all hedge funds’ total asset base, and by monitoring their best equity investments, we have identified a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outperformed the S&P 500 index by 18 percentage points annually 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 24 percentage points in 7 months (see all of our picks from August).
Equally as important, optimistic insider trading activity is another way to parse down the financial markets. Just as you’d expect, there are plenty of stimuli for a bullish insider to cut shares of his or her company, but only one, very simple reason why they would initiate a purchase. Many academic studies have demonstrated the useful potential of this method if investors understand where to look (learn more here).
Keeping this in mind, it’s important to take a gander at the latest action regarding ScanSource, Inc. (NASDAQ:SCSC).
Hedge fund activity in ScanSource, Inc. (NASDAQ:SCSC)
Heading into 2013, a total of 9 of the hedge funds we track were bullish in this stock, a change of 200% from the third quarter. With hedge funds’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings significantly.
Of the funds we track, Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, holds the largest position in ScanSource, Inc. (NASDAQ:SCSC). Arrowstreet Capital has a $45.3 million position in the stock, comprising 0.2% of its 13F portfolio. Sitting at the No. 2 spot is Joel Greenblatt of Gotham Asset Management, with a $2.9 million position; 0.2% of its 13F portfolio is allocated to the company. Other hedge funds that hold long positions include Jim Simons’s Renaissance Technologies, Israel Englander’s Millennium Management and John Overdeck and David Siegel’s Two Sigma Advisors.
Now, key hedge funds have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most valuable position in ScanSource, Inc. (NASDAQ:SCSC). Arrowstreet Capital had 45.3 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $1 million position during the quarter. The following funds were also among the new SCSC investors: Israel Englander’s Millennium Management, John Overdeck and David Siegel’s Two Sigma Advisors, and D. E. Shaw’s D E Shaw.
Insider trading activity in ScanSource, Inc. (NASDAQ:SCSC)
Insider trading activity, especially when it’s bullish, is particularly usable when the company in question has seen transactions within the past six months. Over the latest half-year time period, ScanSource, Inc. (NASDAQ:SCSC) has seen zero unique insiders purchasing, and 4 insider sales (see the details of insider trades here).
Let’s check out hedge fund and insider activity in other stocks similar to ScanSource, Inc. (NASDAQ:SCSC). These stocks are Mentor Graphics Corp (NASDAQ:MENT), ACI Worldwide Inc (NASDAQ:ACIW), Tyler Technologies, Inc. (NYSE:TYL), Systemax Inc. (NYSE:SYX), and PDF Solutions, Inc. (NASDAQ:PDFS). All of these stocks are in the technical & system software industry and their market caps are similar to SCSC’s market cap.