At Insider Monkey we track the activity of some of the best-performing hedge funds like Appaloosa Management, Baupost, and Tiger Global because we determined that some of the stocks that they are collectively bullish on can help us generate returns above the broader indices. Out of thousands of stocks that hedge funds invest in, small-caps can provide the best returns over the long term due to the fact that these companies are less efficiently priced and are usually under the radars of mass-media, analysts and dumb money. This is why we follow the smart money moves in the small-cap space.
Is Monotype Imaging Holdings Inc. (NASDAQ:TYPE) going to take off soon? Prominent investors are getting less optimistic. The number of long hedge fund bets dropped by 1 in recent months. Our calculations also showed that TYPE isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a peek at the key hedge fund action regarding Monotype Imaging Holdings Inc. (NASDAQ:TYPE).
How have hedgies been trading Monotype Imaging Holdings Inc. (NASDAQ:TYPE)?
At Q4’s end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TYPE over the last 14 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Monotype Imaging Holdings Inc. (NASDAQ:TYPE) was held by RGM Capital, which reported holding $57.5 million worth of stock at the end of December. It was followed by Trigran Investments with a $56.9 million position. Other investors bullish on the company included Renaissance Technologies, Daruma Asset Management, and Marshall Wace LLP.
Due to the fact that Monotype Imaging Holdings Inc. (NASDAQ:TYPE) has witnessed declining sentiment from the smart money, it’s easy to see that there were a few hedgies that elected to cut their positions entirely by the end of the third quarter. It’s worth mentioning that Alec Litowitz and Ross Laser’s Magnetar Capital dumped the largest position of the 700 funds watched by Insider Monkey, worth an estimated $0.5 million in stock. Ernest Chow and Jonathan Howe’s fund, Sensato Capital Management, also sold off its stock, about $0.4 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Monotype Imaging Holdings Inc. (NASDAQ:TYPE). These stocks are Federal Agricultural Mortgage Corp. (NYSE:AGM), Twist Bioscience Corporation (NASDAQ:TWST), X Financial (NYSE:XYF), and Century Aluminum Co (NASDAQ:CENX). This group of stocks’ market valuations are closest to TYPE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AGM | 9 | 20050 | 2 |
| TWST | 4 | 20101 | 4 |
| XYF | 2 | 3230 | -2 |
| CENX | 11 | 40938 | 0 |
| Average | 6.5 | 21080 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $21 million. That figure was $177 million in TYPE’s case. Century Aluminum Co (NASDAQ:CENX) is the most popular stock in this table. On the other hand X Financial (NYSE:XYF) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Monotype Imaging Holdings Inc. (NASDAQ:TYPE) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Hedge funds were also right about betting on TYPE as the stock returned 33.7% and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Disclosure: None. This article was originally published at Insider Monkey.
