Hedge Funds Are Dumping MicroStrategy Incorporated (MSTR)

The worries about the economic slowdown in China and the ongoing uncertainty about the path of interest-rate increases triggered several waves of equity sell-offs during the third quarter. Of course, most hedge funds and other asset managers had to stomach substantial losses during the bloody three-month period, which might have caused some to consider fleeing the U.S. equity markets. Interestingly, smaller-cap stocks registered higher losses than large-capitalization stocks during the September quarter, suggesting that institutional investors heavily discarded seemingly riskier equities amid high uncertainty and turmoil. In fact, the Russell 2000 Index lost 11.9% in the third quarter, while the Standard and Poor’s 500 benchmark declined a mere 6.4%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards MicroStrategy Incorporated (NASDAQ:MSTR).

MicroStrategy Incorporated (NASDAQ:MSTR) was in 27 hedge funds’ portfolios at the end of September. MSTR has experienced a decrease in enthusiasm from smart money of late. There were 28 hedge funds in our database with MSTR positions at the end of the previous quarter. 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 Wolverine World Wide, Inc. (NYSE:WWW), WisdomTree Investments, Inc. (NASDAQ:WETF), and PNM Resources, Inc. (NYSE:PNM) to gather more data points.

In today’s marketplace there are several indicators shareholders use to appraise stocks. Some of the most innovative indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the top picks of the elite fund managers can trounce the S&P 500 by a significant margin (see the details here).

Now, we’re going to analyze the latest action encompassing MicroStrategy Incorporated (NASDAQ:MSTR).

How are hedge funds trading MicroStrategy Incorporated (NASDAQ:MSTR)?

Heading into Q4, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -4% from one quarter earlier. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Ricky Sandler’s Eminence Capital has the biggest position in MicroStrategy Incorporated (NASDAQ:MSTR), worth close to $153.7 million, amounting to 2.4% of its total 13F portfolio. Sitting at the No. 2 spot is Glenn J. Krevlin of Glenhill Advisors, with a $87.2 million position; 6.8% of its 13F portfolio is allocated to the stock. Other professional money managers with similar optimism comprise Dmitry Balyasny’s Balyasny Asset Management, Israel Englander’s Millennium Management and Sanford J. Colen’s Apex Capital.

Due to the fact that MicroStrategy Incorporated (NASDAQ:MSTR) has faced bearish sentiment from the entirety of the hedge funds we track, we can see that there lies a certain “tier” of hedgies who sold off their positions entirely in the third quarter. Intriguingly, Aaron Cowen’s Suvretta Capital Management cut the largest investment of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $25.8 million in stock. Brian Taylor’s fund, Pine River Capital Management, also dumped its stock, about $3.8 million worth. These moves are interesting, as total hedge fund interest was cut by 1 funds in the third quarter.

Let’s go over hedge fund activity in other stocks similar to MicroStrategy Incorporated (NASDAQ:MSTR). These stocks are Wolverine World Wide, Inc. (NYSE:WWW), WisdomTree Investments, Inc. (NASDAQ:WETF), PNM Resources, Inc. (NYSE:PNM), and Sothebys (NYSE:BID). This group of stocks’ market values resemble MSTR’s market value.

As you can see these stocks had an average of 18.25 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $525 million in MSTR’s case. Sothebys (NYSE:BID) is the most popular stock in this table. On the other hand PNM Resources, Inc. (NYSE:PNM) is the least popular one with only 13 bullish hedge fund positions. MicroStrategy Incorporated (NASDAQ:MSTR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard BID might be a better candidate to consider a long position.