Cybersecurity firms including FireEye Inc (NASDAQ:FEYE) were boosted mid-day yesterday after the New York Stock Exchange halted trading due to a glitch which was initially thought to have been a breach. Though market officials were quick to clarify that it was an internal problem and not an attack from the outside, FireEye saw its stock rise to as high as $48.60 per share by mid-day when trading was stopped for three hours, up 4.63% from its low of $46.45 per share earlier, before finally settling at a closing price of $47.56 yesterday. Technical problems also plagued United Airlines and The Wall Street Journal on Wednesday, heightening fears that there was a concerted cyber attack on the United States. FireEye’s stock closed at $47.65 per share on Tuesday, July 7, and was being battered yesterday morning before the cybersecurity scare. The stock has hit a high of $49.00 per share in pre-market trading this morning as investors continue to find security in the security of the cybersecurity company.
FireEye Inc (NASDAQ:FEYE) and other cybersecurity firms tend to see a spike in their share price when high-profile breaches happen. The confidence people have in stocks like FireEye when these incidents happen appear to be mirrored in the increase of hedge fund interest the firm received in the first quarter. Heading into the second quarter, a total of 43 of the hedge funds tracked by Insider Monkey held long positions in this stock, up 16% from 37 hedge funds one quarter earlier. The total value of their holdings also increased to $573.19 million by March 31, up 26.17% from $454.32 million the prior quarter, though it should be noted that stock’s price increased by 24.29% in the first three months of the year.
However, we don’t just track the latest moves of funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research, with backtests for the period between 1999 and 2012 and forward testing for the last 2.5 years. The results of our analysis show that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests. Moreover, since the beginning of forward testing in August 2012, the strategy worked brilliantly, outperforming the market every year and returning 135%, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
Another area Insider Monkey follows is insider purchases or sales of stocks. These transactions can tell people whether certain key insiders of companies are betting on their stocks. For FireEye, there were no purchases by insiders recorded in the first six months of the year, while the most recent sale was of 13,000 shares by General Counsel Alexa King on June 22 and 23.
Keeping this in mind, we’re going to view the recent action encompassing FireEye Inc.
Hedge fund activity in FireEye Inc (NASDAQ:FEYE)
According to hedge fund intelligence website Insider Monkey, Karthik Sarma‘s SRS Investment Management had the number one position in FireEye Inc (NASDAQ:FEYE), holding 3.25 million shares worth close to $127.6 million, amounting to 5% of its total 13F portfolio. Coming in second is John Thaler of JAT Capital Management, with a $68.1 million position of 1.74 million shares; the fund had 1.8% of its 13F portfolio invested in the stock. Some other peers with similar optimism encompass Jim Simons’ Renaissance Technologies, John Burbank’s Passport Capital, and Frank Slattery’s Symmetry Peak Management.
Certain hedge funds had jumped into FireEye Inc (NASDAQ:FEYE) headfirst by the end of the first quarter. The previously mentioned JAT Capital Management, led by John Thaler, assembled the most valuable position in FireEye Inc (NASDAQ:FEYE). JAT Capital Management’s investment in the company was a new one, as was Renaissance Technologies’ stake in the firm. The following funds were also among the new FireEye investors: Passport Capital, Sanford J. Colen’s Apex Capital, and Daniel Benton’s Andor Capital Management.
Cybersecurity will only continue to expand as a thriving business as our reliance on technology and secure systems continues to mount, and that is unlikely to change anytime soon; in fact it will only increase exponentially as the Internet of Things era really kicks into gear. With the support of the world’s leading money managers, we deem FireEye Inc (NASDAQ:FEYE) as a secure investment at the moment.
Disclosure: None
