Hedge Funds Aren’t Crazy About Adobe Systems Incorporated (ADBE) Anymore

Adobe Systems Incorporated (NASDAQ:ADBE) investors should pay attention to a decrease in hedge fund sentiment in recent months.

If you’d ask most investors, hedge funds are viewed as slow, old investment vehicles of yesteryear. While there are over 8000 funds in operation at present, we look at the crème de la crème of this group, about 450 funds. It is widely believed that this group controls the lion’s share of the hedge fund industry’s total capital, and by keeping an eye on their top equity investments, we have determined a number of investment strategies that have historically beaten the market. Our small-cap hedge fund strategy beat the S&P 500 index by 18 percentage points per annum 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).

Equally as key, positive insider trading sentiment is a second way to parse down the world of equities. Obviously, there are lots of motivations for an executive to downsize shares of his or her company, but only one, very obvious reason why they would behave bullishly. Various academic studies have demonstrated the impressive potential of this tactic if you understand what to do (learn more here).

Consequently, let’s take a glance at the latest action surrounding Adobe Systems Incorporated (NASDAQ:ADBE).

Hedge fund activity in Adobe Systems Incorporated (NASDAQ:ADBE)

Heading into Q2, a total of 34 of the hedge funds we track were bullish in this stock, a change of -11% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were increasing their stakes substantially.

According to our comprehensive database, Jeffrey Ubben’s ValueAct Capital had the most valuable position in Adobe Systems Incorporated (NASDAQ:ADBE), worth close to $1.362 billion, comprising 15.4% of its total 13F portfolio. Coming in second is Viking Global, managed by Andreas Halvorsen, which held a $309.9 million position; the fund has 1.9% of its 13F portfolio invested in the stock. Other peers that hold long positions include Christopher Lord’s Criterion Capital, Christian Leone’s Luxor Capital Group and D. E. Shaw’s D E Shaw.

Seeing as Adobe Systems Incorporated (NASDAQ:ADBE) has experienced falling interest from hedge fund managers, it’s easy to see that there was a specific group of hedgies that slashed their entire stakes last quarter. Interestingly, Glenn Greenberg’s Brave Warrior Capital sold off the largest investment of the “upper crust” of funds we monitor, totaling about $80.2 million in stock., and Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital was right behind this move, as the fund dropped about $15.1 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.

How have insiders been trading Adobe Systems Incorporated (NASDAQ:ADBE)?

Bullish insider trading is at its handiest when the primary stock in question has seen transactions within the past six months. Over the last 180-day time period, Adobe Systems Incorporated (NASDAQ:ADBE) has seen 1 unique insiders purchasing, and 10 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to Adobe Systems Incorporated (NASDAQ:ADBE). These stocks are Workday Inc (NYSE:WDAY), Catamaran Corp (USA) (NASDAQ:CTRX), CA, Inc. (NASDAQ:CA), salesforce.com, inc. (NYSE:CRM), and Intuit Inc. (NASDAQ:INTU). This group of stocks are the members of the application software industry and their market caps match ADBE’s market cap.