Is KEYW Holding Corp. (KEYW) a Good Buy?

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Micron and Anadarko Petroleum, have not done well during the last 12 months ending in October due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last four quarters ending in October and sixty three percent of these 30 stocks outperformed the market. S&P 500 Index returned only 5.2% during the same period and less than 49% of its constituents managed to beat this return. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at KEYW Holding Corp. (NASDAQ:KEYW) from the perspective of those elite funds.

KEYW Holding Corp. (NASDAQ:KEYW) shareholders have witnessed an increase in support from the world’s most elite money managers in recent months. KEYW was in 8 hedge funds’ portfolios at the end of the third quarter of 2015. There were 7 hedge funds in our database with KEYW positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Limoneira Company (NASDAQ:LMNR), NVE Corporation (NASDAQ:NVEC), and P.A.M. Transportation Services, Inc. (NASDAQ:PTSI) to gather more data points.

Now, let’s analyze the fresh action surrounding KEYW Holding Corp. (NASDAQ:KEYW).

What does the smart money think about KEYW Holding Corp. (NASDAQ:KEYW)?

At the end of the third quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from the second quarter. With hedge funds’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Raging Capital Management, managed by William C. Martin, holds the most valuable position in KEYW Holding Corp. (NASDAQ:KEYW). Raging Capital Management has a $2.9 million position in the stock, comprising 0.4% of its 13F portfolio. The second most bullish fund manager is Brian Ashford-Russell and Tim Woolley of Polar Capital, with a $1 million position; less than 0.1% of its 13F portfolio is allocated to the company. Some other peers with similar optimism comprise Israel Englander’s Millennium Management, Jeffrey Bronchick’s Cove Street Capital and Joseph Mathias’s Concourse Capital Management.

Now, specific money managers have jumped into KEYW Holding Corp. (NASDAQ:KEYW) headfirst. Raging Capital Management, managed by William C. Martin, created the most valuable position in KEYW Holding Corp. (NASDAQ:KEYW). Raging Capital Management had $2.9 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also made a $0.5 million investment in the stock during the quarter. The following funds were also among the new KEYW investors: Joseph Mathias’s Concourse Capital Management and Daniel S. Och’s OZ Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as KEYW Holding Corp. (NASDAQ:KEYW) but similarly valued. We will take a look at Limoneira Company (NASDAQ:LMNR), NVE Corporation (NASDAQ:NVEC), P.A.M. Transportation Services, Inc. (NASDAQ:PTSI), and Applied Genetic Technologies Corp (NASDAQ:AGTC). This group of stocks’ market caps resemble KEYW’s market cap.

As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was $5 million in KEYW’s case. Applied Genetic Technologies Corp (NASDAQ:AGTC) is the most popular stock in this table. On the other hand P.A.M. Transportation Services, Inc. (NASDAQ:PTSI) is the least popular one with only 4 bullish hedge fund positions. KEYW Holding Corp. (NASDAQ:KEYW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard AGTC might be a better candidate to consider a long position.