We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Qualys Inc (NASDAQ:QLYS) based on that data.
Is Qualys Inc (NASDAQ:QLYS) an exceptional investment right now? Investors who are in the know are in an optimistic mood. The number of long hedge fund bets went up by 10 recently. Our calculations also showed that QLYS isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Noam Gottesman of GLG Partners
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a gander at the new hedge fund action regarding Qualys Inc (NASDAQ:QLYS).
How are hedge funds trading Qualys Inc (NASDAQ:QLYS)?
Heading into the first quarter of 2020, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 53% from the third quarter of 2019. On the other hand, there were a total of 17 hedge funds with a bullish position in QLYS a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Renaissance Technologies holds the number one position in Qualys Inc (NASDAQ:QLYS). Renaissance Technologies has a $34.1 million position in the stock, comprising less than 0.1%% of its 13F portfolio. The second most bullish fund manager is Millennium Management, managed by Israel Englander, which holds a $26.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other peers that are bullish consist of Noam Gottesman’s GLG Partners, Ken Griffin’s Citadel Investment Group and John Overdeck and David Siegel’s Two Sigma Advisors. In terms of the portfolio weights assigned to each position Stony Point Capital allocated the biggest weight to Qualys Inc (NASDAQ:QLYS), around 2.54% of its 13F portfolio. Portolan Capital Management is also relatively very bullish on the stock, earmarking 0.89 percent of its 13F equity portfolio to QLYS.
Consequently, key hedge funds have been driving this bullishness. Portolan Capital Management, managed by George McCabe, initiated the largest position in Qualys Inc (NASDAQ:QLYS). Portolan Capital Management had $8.8 million invested in the company at the end of the quarter. David Harding’s Winton Capital Management also made a $6.5 million investment in the stock during the quarter. The other funds with brand new QLYS positions are Richard Walters II’s Stony Point Capital, Donald Sussman’s Paloma Partners, and Benjamin A. Smith’s Laurion Capital Management.
Let’s now take a look at hedge fund activity in other stocks similar to Qualys Inc (NASDAQ:QLYS). These stocks are Iridium Communications Inc. (NASDAQ:IRDM), Valmont Industries, Inc. (NYSE:VMI), Alkermes Plc (NASDAQ:ALKS), and Avista Corp (NYSE:AVA). This group of stocks’ market valuations are closest to QLYS’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IRDM | 20 | 285571 | 2 |
| VMI | 24 | 315469 | -4 |
| ALKS | 33 | 568267 | 7 |
| AVA | 15 | 149256 | -2 |
| Average | 23 | 329641 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $330 million. That figure was $180 million in QLYS’s case. Alkermes Plc (NASDAQ:ALKS) is the most popular stock in this table. On the other hand Avista Corp (NYSE:AVA) is the least popular one with only 15 bullish hedge fund positions. Qualys Inc (NASDAQ:QLYS) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but still beat the market by 5.5 percentage points. Hedge funds were also right about betting on QLYS as the stock returned -3% during the first quarter (through March 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
