Is Bottomline Technologies (EPAY) A Good Stock To Buy?

The worries about the election and the ongoing uncertainty about the path of interest-rate increases have been keeping investors on the sidelines. Of course, most hedge funds and other asset managers have been underperforming main stock market indices since the middle of 2015. Interestingly though, smaller-cap stocks registered their best performance relative to the large-capitalization stocks since the end of the June quarter, suggesting that this may be the best time to take a cue from their stock picks. In fact, the Russell 2000 Index gained more than 15% since the beginning of the third quarter, while the Standard and Poor’s 500 benchmark returned less than 6%. This article will lay out and discuss the hedge fund and institutional investor sentiment towards Bottomline Technologies (NASDAQ:EPAY) .

Bottomline Technologies (NASDAQ:EPAY) has seen an increase in enthusiasm from smart money recently. There were 11 hedge funds in our database with EPAY holdings at the end of the previous quarter. At the end of this article we will also compare EPAY to other stocks including Nevsun Resources (USA) (NYSEAMEX:NSU), Merit Medical Systems, Inc. (NASDAQ:MMSI), and Dermira Inc (NASDAQ:DERM) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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Now, let’s take a look at the recent action surrounding Bottomline Technologies (NASDAQ:EPAY).

What have hedge funds been doing with Bottomline Technologies (NASDAQ:EPAY)?

At Q3’s end, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27% from the previous quarter. On the other hand, there were a total of 8 hedge funds with a bullish position in EPAY at the beginning of this year. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, Ken Fisher’s Fisher Asset Management has the most valuable position in Bottomline Technologies (NASDAQ:EPAY), worth close to $11.4 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is Renaissance Technologies, led by Jim Simons, which holds a $10.9 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining peers with similar optimism comprise Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

As industrywide interest jumped, key money managers were breaking ground themselves. Quant hedge fund D E Shaw initiated the biggest position in Bottomline Technologies (NASDAQ:EPAY). D E Shaw had $5 million invested in the company at the end of the quarter. Sheetal Duggal’s Thrax Management also initiated a $3.2 million position during the quarter. The other funds with new positions in the stock are Cliff Asness’s AQR Capital Management, John Overdeck and David Siegel’s Two Sigma Advisors, and Josh Goldberg’s G2 Investment Partners Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Bottomline Technologies (NASDAQ:EPAY) but similarly valued. These stocks are Nevsun Resources (USA) (NYSEAMEX:NSU), Merit Medical Systems, Inc. (NASDAQ:MMSI), Dermira Inc (NASDAQ:DERM), and Luminex Corporation (NASDAQ:LMNX). This group of stocks’ market caps match EPAY’s market cap.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $110 million. That figure was $51 million in EPAY’s case. Dermira Inc (NASDAQ:DERM) is the most popular stock in this table. On the other hand Nevsun Resources (USA) (NYSEAMEX:NSU) is the least popular one with only 12 bullish hedge fund positions. Bottomline Technologies (NASDAQ:EPAY) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DERM might be a better candidate to consider taking a long position in.