Should You Sell MicroStrategy Incorporated (MSTR)?

What’s a smart MicroStrategy Incorporated (NASDAQ:MSTR) investor to do?

In the eyes of many traders, hedge funds are assumed to be bloated, outdated investment tools of an era lost to time. Although there are In excess of 8,000 hedge funds trading in present day, Insider Monkey looks at the moguls of this group, close to 525 funds. It is widely held that this group has its hands on the majority of all hedge funds’ total assets, and by keeping an eye on their highest performing equity investments, we’ve determined a few investment strategies that have historically outperformed the market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per annum 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 outpaced the S&P 500 index by 33 percentage points in 11 months (find a sample of our picks).

Equally as necessary, positive insider trading sentiment is another way to look at the stock market universe. There are a number of incentives for a bullish insider to sell shares of his or her company, but just one, very simple reason why they would buy. Several empirical studies have demonstrated the useful potential of this strategy if piggybackers know what to do (learn more here).

MicroStrategy Incorporated (NASDAQ:MSTR)

What’s more, it’s important to analyze the newest info surrounding MicroStrategy Incorporated (NASDAQ:MSTR).

Hedge fund activity in MicroStrategy Incorporated (NASDAQ:MSTR)

At the end of the second quarter, a total of 17 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With hedgies’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their stakes considerably.

Out of the hedge funds we follow, Ricky Sandler’s Eminence Capital had the most valuable position in MicroStrategy Incorporated (NASDAQ:MSTR), worth close to $77 million, accounting for 1.9% of its total 13F portfolio. On Eminence Capital’s heels is Sanford J. Colen of Apex Capital, with a $21.2 million position; 1.4% of its 13F portfolio is allocated to the company. Other peers that hold long positions include Steven Cohen’s SAC Capital Advisors, and Glenn J. Krevlin’s Glenhill Advisors.

Since MicroStrategy Incorporated (NASDAQ:MSTR) has faced declining interest from the top-tier hedge fund industry, it’s easy to see that there is a sect of hedge funds that slashed their entire stakes at the end of the second quarter. Intriguingly, Andrew Sandler’s Sandler Capital Management sold off the largest investment of the 450+ funds we monitor, totaling about $11.4 million in stock. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dumped its stock, about $1.6 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with MicroStrategy Incorporated (NASDAQ:MSTR)?

Bullish insider trading is best served when the company in question has experienced transactions within the past six months. Over the latest six-month time period, MicroStrategy Incorporated (NASDAQ:MSTR) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll also examine the relationship between both of these indicators in other stocks similar to MicroStrategy Incorporated (NASDAQ:MSTR). These stocks are Interactive Intelligence Group Inc (NASDAQ:ININ), Blackbaud, Inc. (NASDAQ:BLKB), NetScout Systems, Inc. (NASDAQ:NTCT), Pegasystems Inc. (NASDAQ:PEGA), and Bottomline Technologies (NASDAQ:EPAY). All of these stocks are in the business software & services industry and their market caps resemble MSTR’s market cap.