The successful funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at KEYW Holding Corp. (NASDAQ:KEYW) from the perspective of those successful funds.
Is KEYW Holding Corp. (NASDAQ:KEYW) a first-rate investment right now? Hedge funds are undeniably in an optimistic mood. The number of long hedge fund positions improved by 4 lately. There were 5 hedge funds in our database with KEYW holdings 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 Intersect ENT Inc (NASDAQ:XENT), Vicor Corp (NASDAQ:VICR), and Village Super Market, Inc. (NASDAQ:VLGEA) to gather more data points.
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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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Keeping this in mind, we’re going to take a gander at the latest action regarding KEYW Holding Corp. (NASDAQ:KEYW).
How are hedge funds trading KEYW Holding Corp. (NASDAQ:KEYW)?
Heading into the fourth quarter of 2016, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a growth of 80% from one quarter earlier. On the other hand, there were a total of 5 hedge funds with a bullish position in KEYW at the beginning of this year. With the smart money’s sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
According to Insider Monkey’s institutional investor database, Royce & Associates, led by Chuck Royce, holds the most valuable position in KEYW Holding Corp. (NASDAQ:KEYW). Royce & Associates has a $8.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second most bullish fund manager is D E Shaw, one of the biggest hedge funds in the world, with a $1.5 million position; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining peers that are bullish contain Peter Muller’s PDT Partners, Ken Griffin’s Citadel Investment Group and Jim Simons’ Renaissance Technologies. 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.
With a general bullishness amongst the heavyweights, some big names have jumped into KEYW Holding Corp. (NASDAQ:KEYW) headfirst. PDT Partners created the most outsized position in KEYW Holding Corp. (NASDAQ:KEYW). PDT Partners had $0.5 million invested in the company at the end of the quarter. Renaissance Technologies also made a $0.3 million investment in the stock during the quarter. The other funds with brand new KEYW positions are Joel Greenblatt’s Gotham Asset Management, Paul Tudor Jones’ Tudor Investment Corp, and Cliff Asness’ AQR Capital 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. These stocks are Intersect ENT Inc (NASDAQ:XENT), Vicor Corp (NASDAQ:VICR), Village Super Market, Inc. (NASDAQ:VLGEA), and Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH). This group of stocks’ market caps match KEYW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XENT | 13 | 67784 | 3 |
| VICR | 6 | 14868 | -2 |
| VLGEA | 5 | 55983 | -1 |
| SPWH | 15 | 41332 | 2 |
As you can see these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $45 million. That figure was $12 million in KEYW’s case. Sportsman’s Warehouse Holdings Inc (NASDAQ:SPWH) is the most popular stock in this table. On the other hand Village Super Market, Inc. (NASDAQ:VLGEA) is the least popular one with only 5 bullish hedge fund positions. KEYW Holding Corp. (NASDAQ:KEYW) 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 SPWH might be a better candidate to consider taking a long position in.
Disclosure: None
