Hedge Funds Are Crazy About Electronics For Imaging, Inc. (EFII)

Hedge funds run by legendary names like Nelson Peltz and David Tepper make billions of dollars a year for themselves and their super-rich accredited investors (you’ve got to have a minimum of $1 million liquid to invest in a hedge fund) by spending enormous resources on analyzing and uncovering data about small-cap stocks that the big brokerage houses don’t follow. Small caps are where they can generate significant out-performance. That’s why we pay special attention to hedge fund activity in these stocks.

Is Electronics For Imaging, Inc. (NASDAQ:EFII) a first-rate investment now? Investors who are in the know are turning bullish. The number of long hedge fund bets rose by 2 in recent months. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Insys Therapeutics Inc (NASDAQ:INSY), First Financial Bankshares Inc (NASDAQ:FFIN), and Louisiana-Pacific Corporation (NYSE:LPX) to gather more data points.

In the eyes of most shareholders, hedge funds are viewed as underperforming, old investment vehicles of the past. While there are over an 8000 funds trading today, Our researchers look at the elite of this group, approximately 700 funds. These hedge fund managers control bulk of the hedge fund industry’s total capital, and by tracking their matchless investments, Insider Monkey has found many investment strategies that have historically outperformed the broader indices. Insider Monkey’s small-cap hedge fund strategy outrun the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, we’re going to go over the new action regarding Electronics For Imaging, Inc. (NASDAQ:EFII).

What does the smart money think about Electronics For Imaging, Inc. (NASDAQ:EFII)?

At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, up by 18% from the second quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Eric Bannasch’s Cadian Capital has the biggest position in Electronics For Imaging, Inc. (NASDAQ:EFII), worth close to $112.5 million, amounting to 4.1% of its total 13F portfolio. On Cadian Capital’s heels is Daruma Asset Management, managed by Mariko Gordon, which holds a $61.8 million position; the fund has 3.8% of its 13F portfolio invested in the stock. Some other members of the smart money that are bullish consist of Clifford Fox’s Columbus Circle Investors, Phill Gross and Robert Atchinson’s Adage Capital Management and Nick Niell’s Arrowgrass Capital Partners.

With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Columbus Circle Investors, managed by Clifford Fox, initiated the most valuable position in Electronics For Imaging, Inc. (NASDAQ:EFII). The fund reportedly had $26.3 million invested in the company at the end of the quarter. Nick Niell’s Arrowgrass Capital Partners also made a $9.2 million investment in the stock during the quarter. The following funds were also among the new EFII investors: John Croghan and Richard Fradin’s Rail-Splitter Capital Management and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s go over hedge fund activity in other stocks similar to Electronics For Imaging, Inc. (NASDAQ:EFII). We will take a look at Insys Therapeutics Inc (NASDAQ:INSY), First Financial Bankshares Inc (NASDAQ:FFIN), Louisiana-Pacific Corporation (NYSE:LPX), and Monolithic Power Systems, Inc. (NASDAQ:MPWR). This group of stocks’ market valuations are similar to EFII’s market valuation.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $217 million. That figure was $267 million in EFII’s case. Louisiana-Pacific Corporation (NYSE:LPX) is the most popular stock in this table, while First Financial Bankshares Inc (NASDAQ:FFIN) is the laggard with only 5 bullish hedge fund positions. Electronics For Imaging, Inc. (NASDAQ:EFII) is not the least popular stock in this group, but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard LPX might be a better candidate to consider a long position.