Hedge Funds Are Crazy About Pervasive Software Inc. (PVSW): Exa Corp (EXA), FalconStor Software, Inc. (FALC)

Pervasive Software Inc. (NASDAQ:PVSW) investors should be aware of an increase in hedge fund sentiment lately.

If you’d ask most stock holders, hedge funds are viewed as worthless, old financial tools of yesteryear. While there are more than 8000 funds with their doors open today, we look at the leaders of this club, about 450 funds. It is widely believed that this group oversees the lion’s share of all hedge funds’ total asset base, and by paying attention to their top stock picks, we have discovered a few investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outpaced 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 outperformed the S&P 500 index by 24 percentage points in 7 months (check out a sample of our picks).

Equally as important, positive insider trading sentiment is a second way to parse down the financial markets. Obviously, there are lots of stimuli for a bullish insider to drop shares of his or her company, but just one, very simple reason why they would initiate a purchase. Various empirical studies have demonstrated the impressive potential of this tactic if investors understand what to do (learn more here).

With these “truths” under our belt, let’s take a glance at the key action surrounding Pervasive Software Inc. (NASDAQ:PVSW).

How have hedgies been trading Pervasive Software Inc. (NASDAQ:PVSW)?

At year’s end, a total of 9 of the hedge funds we track were bullish in this stock, a change of 50% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly.

When looking at the hedgies we track, Chuck Royce’s Royce & Associates had the largest position in Pervasive Software Inc. (NASDAQ:PVSW), worth close to $13 million, comprising 0% of its total 13F portfolio. The second largest stake is held by Dialectic Capital Management, managed by John Fichthorn, which held a $9 million position; 0% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include John W. Rogers’s Ariel Investments, Jim Simons’s Renaissance Technologies and Cliff Asness’s AQR Capital Management.

As aggregate interest increased, specific money managers were breaking ground themselves. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the biggest position in Pervasive Software Inc. (NASDAQ:PVSW). Two Sigma Advisors had 0 million invested in the company at the end of the quarter. Mario Gabelli’s GAMCO Investors also initiated a $0 million position during the quarter. The only other fund with a new position in the stock is Paul Touradji’s TOURADJI CAPITAL MANAGEMENT, LP.

What have insiders been doing with Pervasive Software Inc. (NASDAQ:PVSW)?

Insider purchases made by high-level executives is best served when the primary stock in question has experienced transactions within the past 180 days. Over the latest six-month time period, Pervasive Software Inc. (NASDAQ:PVSW) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Pervasive Software Inc. (NASDAQ:PVSW). These stocks are Exa Corp (NASDAQ:EXA), FalconStor Software, Inc. (NASDAQ:FALC), PC Tel Inc (NASDAQ:PCTI), ARC Document Solutions Inc (NYSE:ARC), and Brightcove Inc (NASDAQ:BCOV). This group of stocks are in the application software industry and their market caps resemble PVSW’s market cap.

With the returns exhibited by the aforementioned strategies, retail investors should always keep an eye on hedge fund and insider trading sentiment, and Pervasive Software Inc. (NASDAQ:PVSW) shareholders fit into this picture quite nicely.

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