Is Check Point Software Technologies Ltd. (CHKP) Going to Burn These Hedge Funds?

Check Point Software Technologies Ltd. (NASDAQ:CHKP) has seen a decrease in enthusiasm from smart money of late.

To most shareholders, hedge funds are seen as worthless, outdated investment tools of the past. While there are more than 8000 funds trading at present, we look at the masters of this club, close to 450 funds. Most estimates calculate that this group oversees most of the hedge fund industry’s total asset base, and by keeping an eye on their highest performing stock picks, we have come up with a number of investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per year 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 (check out a sample of our picks).

Just as key, optimistic insider trading sentiment is another way to parse down the financial markets. Obviously, there are a variety of stimuli for a corporate insider to get rid of shares of his or her company, but just one, very simple reason why they would initiate a purchase. Many academic studies have demonstrated the market-beating potential of this tactic if shareholders know where to look (learn more here).

With these “truths” under our belt, let’s take a glance at the key action surrounding Check Point Software Technologies Ltd. (NASDAQ:CHKP).

What have hedge funds been doing with Check Point Software Technologies Ltd. (NASDAQ:CHKP)?

At Q1’s end, a total of 28 of the hedge funds we track were bullish in this stock, a change of -10% from the first quarter. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes meaningfully.

When looking at the hedgies we track, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC had the largest position in Check Point Software Technologies Ltd. (NASDAQ:CHKP), worth close to $112.8 million, accounting for 1.2% of its total 13F portfolio. The second largest stake is held by David Cohen and Harold Levy of Iridian Asset Management, with a $93.8 million position; 1.4% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include Robert Pitts’s Steadfast Capital Management, D. E. Shaw’s D E Shaw and David Tepper’s Appaloosa Management LP.

Because Check Point Software Technologies Ltd. (NASDAQ:CHKP) has faced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of funds who were dropping their entire stakes in Q1. At the top of the heap, Thomas Steyer’s Farallon Capital dropped the biggest stake of the 450+ funds we watch, comprising close to $127.3 million in stock.. Martin D. Sass’s fund, MD Sass, also dropped its stock, about $24.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 3 funds in Q1.

What have insiders been doing with Check Point Software Technologies Ltd. (NASDAQ:CHKP)?

Insider purchases made by high-level executives is at its handiest when the company in focus has experienced transactions within the past six months. Over the last six-month time frame, Check Point Software Technologies Ltd. (NASDAQ:CHKP) has experienced zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Check Point Software Technologies Ltd. (NASDAQ:CHKP). These stocks are AsiaInfo-Linkage, Inc. (NASDAQ:ASIA), Mantech International Corp (NASDAQ:MANT), Brady Corp (NYSE:BRC), Sourcefire, Inc. (NASDAQ:FIRE), and Symantec Corporation (NASDAQ:SYMC). All of these stocks are in the security software & services industry and their market caps resemble CHKP’s market cap.