Bottomline Technologies (EPAY): Hedge Funds Are Bearish and Insiders Are Undecided, What Should You Do?

What’s a smart Bottomline Technologies (NASDAQ:EPAY) investor to do?

If you were to ask many investors, hedge funds are assumed to be delayed, outdated financial tools of an era lost to time. Although there are over 8,000 hedge funds with their doors open currently, Insider Monkey focuses on the bigwigs of this club, close to 525 funds. It is assumed that this group controls the majority of all hedge funds’ total assets, and by watching their best stock picks, we’ve discovered a number of investment strategies that have historically outstripped the market. Our small-cap hedge fund strategy beat 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 (see all of our picks from August).

Equally as useful, bullish insider trading activity is a second way to look at the stock market universe. There are many stimuli for an insider to get rid of shares of his or her company, but only one, very simple reason why they would initiate a purchase. Several empirical studies have demonstrated the valuable potential of this method if shareholders understand where to look (learn more here).

What’s more, let’s examine the latest info about Bottomline Technologies (NASDAQ:EPAY).

Hedge fund activity in Bottomline Technologies (NASDAQ:EPAY)

In preparation for the third quarter, a total of 6 of the hedge funds we track held long positions in this stock, a change of -14% from the first quarter. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably.

Out of the hedge funds we follow, Millennium Management, managed by Israel Englander, holds the biggest position in Bottomline Technologies (NASDAQ:EPAY). Millennium Management has a $1.3 million position in the stock, comprising less than 0.1%% of its 13F portfolio. Sitting at the No. 2 spot is Chuck Royce of Royce & Associates, with a $1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that are bullish include Matthew Hulsizer’s PEAK6 Capital Management, Matthew Tewksbury’s Stevens Capital Management and Mike Vranos’s Ellington.

Since Bottomline Technologies (NASDAQ:EPAY) has experienced a fall in interest from the top-tier hedge fund industry, it’s safe to say that there lies a certain “tier” of fund managers that slashed their entire stakes heading into Q2. At the top of the heap, John Murphy’s Alydar Capital sold off the biggest position of all the hedgies we track, valued at close to $7.1 million in stock. D. E. Shaw’s fund, D E Shaw, also dumped its stock, about $1.8 million worth. These transactions are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q2.

How are insiders trading Bottomline Technologies (NASDAQ:EPAY)?

Legal insider trading, particularly when it’s bullish, is particularly usable when the company we’re looking at has experienced transactions within the past half-year. Over the last 180-day time frame, Bottomline Technologies (NASDAQ:EPAY) has experienced zero unique insiders buying, 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 Bottomline Technologies (NASDAQ:EPAY). These stocks are Blackbaud, Inc. (NASDAQ:BLKB), Interactive Intelligence Group Inc (NASDAQ:ININ), MicroStrategy Incorporated (NASDAQ:MSTR), NetScout Systems, Inc. (NASDAQ:NTCT), and Pegasystems Inc. (NASDAQ:PEGA). This group of stocks belong to the business software & services industry and their market caps are similar to EPAY’s market cap.

Using the returns shown by our studies, average investors should always keep one eye on hedge fund and insider trading activity, and Bottomline Technologies (NASDAQ:EPAY) is an important part of this process.

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