Should solar investors buy SolarWinds Inc (NYSE:SWI)? Hedge funds are.
If you were to ask many traders, hedge funds are seen as delayed, outdated financial tools of an era lost to time. Although there are more than 8,000 hedge funds in operation currently, this site focuses on the upper echelon of this group, close to 525 funds. Analysts calculate that this group has its hands on the majority of the hedge fund industry’s total assets, and by monitoring their highest performing investments, we’ve unsheathed a number of investment strategies that have historically outperformed the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually 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 33 percentage points in 11 months (find a sample of our picks).
Just as useful, optimistic insider trading sentiment is a second way to look at the marketplace. There are a variety of motivations for a corporate insider to drop shares of his or her company, but only one, very simple reason why they would buy. Many empirical studies have demonstrated the valuable potential of this tactic if investors know what to do (learn more here).
Furthermore, we’re going to examine the recent info surrounding SolarWinds Inc (NYSE:SWI).
How have hedgies been trading SolarWinds Inc (NYSE:SWI)?
In preparation for the third quarter, a total of 20 of the hedge funds we track were bullish in this stock, a change of 18% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably.
Out of the hedge funds we follow, Lee Ainslie’s Maverick Capital had the largest position in SolarWinds Inc (NYSE:SWI), worth close to $163.9 million, comprising 2.2% of its total 13F portfolio. On Maverick Capital’s heels is Renaissance Technologies, managed by Jim Simons, which held a $60.6 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Scott McLellan’s Marble Arch Investments, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group.
As one would understandably expect, particular hedge funds were leading the bulls’ herd. Maverick Capital, managed by Lee Ainslie, assembled the largest position in SolarWinds Inc (NYSE:SWI). Maverick Capital had 163.9 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also initiated a $60.6 million position during the quarter. The following funds were also among the new SWI investors: Scott McLellan’s Marble Arch Investments, Israel Englander’s Millennium Management, and Ken Griffin’s Citadel Investment Group.
What have insiders been doing with SolarWinds Inc (NYSE:SWI)?
Insider buying made by high-level executives is best served when the company in question has experienced transactions within the past 180 days. Over the latest six-month time frame, SolarWinds Inc (NYSE:SWI) has seen zero unique insiders buying, and zero insider sales (see the details of insider trades here).
We’ll check out the relationship between both of these indicators in other stocks similar to SolarWinds Inc (NYSE:SWI). These stocks are CommVault Systems, Inc. (NASDAQ:CVLT), Fortinet Inc (NASDAQ:FTNT), Cadence Design Systems Inc (NASDAQ:CDNS), Splunk Inc (NASDAQ:SPLK), and Msci Inc (NYSE:MSCI). This group of stocks are the members of the application software industry and their market caps are similar to SWI’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| CommVault Systems, Inc. (NASDAQ:CVLT) | 20 | 0 | 0 |
| Fortinet Inc (NASDAQ:FTNT) | 27 | 0 | 0 |
| Cadence Design Systems Inc (NASDAQ:CDNS) | 21 | 0 | 0 |
| Splunk Inc (NASDAQ:SPLK) | 32 | 0 | 0 |
| Msci Inc (NYSE:MSCI) | 16 | 0 | 0 |
Using the returns demonstrated by Insider Monkey’s analyses, average investors must always track hedge fund and insider trading sentiment, and SolarWinds Inc (NYSE:SWI) shareholders fit into this picture quite nicely.
