BMC Software, Inc. (BMC): You Must See This Data To Believe It

BMC Software, Inc. (NASDAQ:BMC) has seen a decrease in activity from the world’s largest hedge funds recently.

In the eyes of most market participants, hedge funds are seen as underperforming, outdated financial vehicles of yesteryear. While there are greater than 8000 funds in operation at present, we at Insider Monkey hone in on the aristocrats of this club, around 450 funds. Most estimates calculate that this group oversees the lion’s share of all hedge funds’ total capital, and by monitoring their highest performing equity investments, we have formulated a number of investment strategies that have historically outperformed 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 started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 24 percentage points in 7 months (explore the details and some picks here).

Just as beneficial, positive insider trading activity is a second way to parse down the financial markets. There are a number of stimuli for an upper level exec to downsize shares of his or her company, but just one, very obvious reason why they would buy. Plenty of empirical studies have demonstrated the useful potential of this method if “monkeys” understand what to do (learn more here).

With all of this in mind, we’re going to take a peek at the latest action surrounding BMC Software, Inc. (NASDAQ:BMC).

How are hedge funds trading BMC Software, Inc. (NASDAQ:BMC)?

Heading into 2013, a total of 19 of the hedge funds we track held long positions in this stock, a change of -27% from the third quarter. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their stakes substantially.

When looking at the hedgies we track, Paul Singer’s Elliott Management had the largest position in BMC Software, Inc. (NASDAQ:BMC), worth close to $530.9 million, accounting for 16.2% of its total 13F portfolio. The second largest stake is held by Larry Robbins of Glenview Capital, with a $206.4 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Remaining hedgies that hold long positions include Jim Simons’s Renaissance Technologies, D. E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management.

Since BMC Software, Inc. (NASDAQ:BMC) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few hedge funds that slashed their entire stakes in Q4. At the top of the heap, Keith Meister’s Corvex Capital said goodbye to the biggest investment of the 450+ funds we watch, worth close to $73.1 million in stock., and Jeffrey Altman of Owl Creek Asset Management was right behind this move, as the fund dropped about $40.8 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 7 funds in Q4.

How are insiders trading BMC Software, Inc. (NASDAQ:BMC)?

Insider trading activity, especially when it’s bullish, is particularly usable when the primary stock in question has seen transactions within the past six months. Over the last half-year time frame, BMC Software, Inc. (NASDAQ:BMC) has seen zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).

Let’s also take a look at hedge fund and insider activity in other stocks similar to BMC Software, Inc. (NASDAQ:BMC). These stocks are Workday Inc (NYSE:WDAY), SolarWinds Inc (NYSE:SWI), Red Hat, Inc. (NYSE:RHT), F5 Networks, Inc. (NASDAQ:FFIV), and Nuance Communications Inc. (NASDAQ:NUAN). This group of stocks are in the application software industry and their market caps are similar to BMC’s market cap.

With the returns demonstrated by our strategies, everyday investors should always pay attention to hedge fund and insider trading sentiment, and BMC Software, Inc. (NASDAQ:BMC) is an important part of this process.

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