Hedge Funds Are Buying Guidewire Software Inc (GWRE)

Guidewire Software Inc (NYSE:GWRE) shareholders have witnessed an increase in support from the world’s most elite money managers of late.

According to most market participants, hedge funds are assumed to be underperforming, outdated financial vehicles of years past. While there are greater than 8000 funds trading today, we at Insider Monkey look at the bigwigs of this club, around 450 funds. It is widely believed that this group has its hands on most of all hedge funds’ total capital, and by watching their top investments, we have revealed a few investment strategies that have historically beaten Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year 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 outclassed the S&P 500 index by 23.3 percentage points in 8 months (explore the details and some picks here).

Just as key, optimistic insider trading activity is another way to parse down the stock market universe. There are plenty of stimuli for a corporate insider to sell shares of his or her company, but just one, very simple reason why they would buy. Various empirical studies have demonstrated the market-beating potential of this strategy if piggybackers know what to do (learn more here).

With all of this in mind, we’re going to take a gander at the recent action regarding Guidewire Software Inc (NYSE:GWRE).

What does the smart money think about Guidewire Software Inc (NYSE:GWRE)?

Heading into Q2, a total of 14 of the hedge funds we track held long positions in this stock, a change of 56% from the previous quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings considerably.

Of the funds we track, Panayotis Takis Sparaggis’s Alkeon Capital Management had the most valuable position in Guidewire Software Inc (NYSE:GWRE), worth close to $41.3 million, comprising 0.9% of its total 13F portfolio. The second largest stake is held by Matthew Iorio of White Elm Capital, with a $20.7 million position; 3.6% of its 13F portfolio is allocated to the stock. Other hedge funds with similar optimism include Drew Cupps’s Cupps Capital Management, John Murphy’s Alydar Capital and Glenn Russell Dubin’s Highbridge Capital Management.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, assembled the biggest position in Guidewire Software Inc (NYSE:GWRE). Millennium Management had 2 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also made a $0.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Mike Vranos’s Ellington, D. E. Shaw’s D E Shaw, and John Overdeck and David Siegel’s Two Sigma Advisors.

What have insiders been doing with Guidewire Software Inc (NYSE:GWRE)?

Bullish insider trading is most useful when the company in focus has seen transactions within the past six months. Over the latest 180-day time frame, Guidewire Software Inc (NYSE:GWRE) has seen 1 unique insiders buying, and 10 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Guidewire Software Inc (NYSE:GWRE). These stocks are Sapient Corporation (NASDAQ:SAPE), Convergys Corporation (NYSE:CVG), Verint Systems Inc. (NASDAQ:VRNT), SS and C Technologies Holdings Inc (NASDAQ:SSNC), and Qlik Technologies Inc (NASDAQ:QLIK). This group of stocks are in the business software & services industry and their market caps are similar to GWRE’s market cap.

With the returns shown by the aforementioned studies, everyday investors must always keep an eye on hedge fund and insider trading sentiment, and Guidewire Software Inc (NYSE:GWRE) is an important part of this process.

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