Hedge Funds Are Betting On Sourcefire, Inc. (FIRE)

Sourcefire, Inc. (NASDAQ:FIRE) has experienced an increase in hedge fund interest lately.

To most market participants, hedge funds are viewed as underperforming, old investment tools of the past. While there are greater than 8000 funds in operation at present, we choose to focus on the leaders of this club, around 450 funds. It is widely believed that this group has its hands on the majority of the smart money’s total capital, and by monitoring their top investments, we have found a few investment strategies that have historically beaten 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 topped the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Just as key, bullish insider trading activity is another way to parse down the world of equities. Obviously, there are plenty of incentives for an upper level exec to get rid of shares of his or her company, but only one, very simple reason why they would initiate a purchase. Various academic studies have demonstrated the useful potential of this tactic if you know where to look (learn more here).

With all of this in mind, it’s important to take a glance at the latest action encompassing Sourcefire, Inc. (NASDAQ:FIRE).

How are hedge funds trading Sourcefire, Inc. (NASDAQ:FIRE)?

Heading into Q2, a total of 20 of the hedge funds we track were long in this stock, a change of 33% from the previous quarter. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully.

When looking at the hedgies we track, Ken Griffin’s Citadel Investment Group had the biggest position in Sourcefire, Inc. (NASDAQ:FIRE), worth close to $59.2 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Donald Chiboucis of Columbus Circle Investors, with a $25.5 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedgies with similar optimism include Dmitry Balyasny’s Balyasny Asset Management, Jim Simons’s Renaissance Technologies and Israel Englander’s Millennium Management.

Consequently, some big names were breaking ground themselves. Columbus Circle Investors, managed by Donald Chiboucis, established the most valuable position in Sourcefire, Inc. (NASDAQ:FIRE). Columbus Circle Investors had 25.5 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also made a $21.5 million investment in the stock during the quarter. The other funds with new positions in the stock are Jim Simons’s Renaissance Technologies, Andrew Sandler’s Sandler Capital Management, and Wojciech Uzdelewicz’s Espalier Global Management.

What have insiders been doing with Sourcefire, Inc. (NASDAQ:FIRE)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company we’re looking at has experienced transactions within the past six months. Over the last half-year time period, Sourcefire, Inc. (NASDAQ:FIRE) has experienced zero unique insiders buying, and 6 insider sales (see the details of insider trades here).

Let’s also examine hedge fund and insider activity in other stocks similar to Sourcefire, Inc. (NASDAQ:FIRE). These stocks are Intralinks Holdings Inc (NYSE:IL), KEYW Holding Corp. (NASDAQ:KEYW), AsiaInfo-Linkage, Inc. (NASDAQ:ASIA), Mantech International Corp (NASDAQ:MANT), and Brady Corp (NYSE:BRC). This group of stocks are in the security software & services industry and their market caps are similar to FIRE’s market cap.

With the results shown by the aforementioned studies, retail investors should always watch hedge fund and insider trading sentiment, and Sourcefire, Inc. (NASDAQ:FIRE) applies perfectly to this mantra.

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