Is Mitek Systems, Inc. (MITK) A Good Stock To Buy?

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Mitek Systems, Inc. (NASDAQ:MITK) from the perspective of those elite funds.

Is Mitek Systems, Inc. (NASDAQ:MITK) worth your attention right now? Investors who are in the know are getting less bullish. The number of bullish hedge fund bets dropped by 1 recently. At the end of this article we will also compare MITK to other stocks, including Calithera Biosciences, Inc (NASDAQ: CALA), Alimera Sciences Inc (NASDAQ:ALIM), and First Trust Strategic High Income Fd II (NYSE:FHY) to get a better sense of its popularity.

If you’d ask most shareholders, hedge funds are seen as underperforming, outdated financial vehicles of the past. While there are over 8000 funds in operation at the moment, We choose to focus on the masters of this group, around 700 funds. It is estimated that this group of investors handle bulk of all hedge funds’ total capital, and by monitoring their finest picks, Insider Monkey has uncovered a few investment strategies that have historically exceeded the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, let’s view the fresh action encompassing Mitek Systems, Inc. (NASDAQ:MITK).

How are hedge funds trading Mitek Systems, Inc. (NASDAQ:MITK)?

Heading into Q4, a total of 6 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -14% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Mark Coe’s Coe Capital Management has the biggest position in Mitek Systems, Inc. (NASDAQ:MITK), worth close to $0.8 million, corresponding to 0.3% of its total 13F portfolio. Sitting at the No. 2 spot is D E Shaw, led by D. E. Shaw, holding an $0.6 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other peers that hold long positions include Richard Driehaus’ Driehaus Capital, Peter Algert and Kevin Coldiron’s Algert Coldiron Investors and Mario Gabelli’s GAMCO Investors.

Since Mitek Systems, Inc. (NASDAQ:MITK) has experienced bearish sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of funds who sold off their positions entirely last quarter. At the top of the heap, Israel Englander’s Millennium Management said goodbye to the largest stake of the 700 funds monitored by Insider Monkey, valued at close to $0.2 million in stock. Gregory Fraser, Rudolph Kluiber, and Timothy Krochuk’s fund, GRT Capital Partners, also sold off its position, valued at about $0.1 million.

Let’s go over hedge fund activity in other stocks similar to Mitek Systems, Inc. (NASDAQ:MITK). These stocks are Calithera Biosciences Inc (NASDAQ:CALA), Alimera Sciences Inc (NASDAQ:ALIM), First Trust Strategic High Income Fd II (NYSE:FHY), and Jason Industries Inc (NASDAQ:JASN). This group of stocks’ market caps are closest to MITK’s market cap.

As you can see these stocks had an average of 8 hedge funds with bullish positions and the average amount invested in these stocks was $25 million. That figure was just $2 million in MITK’s case. Jason Industries Inc (NASDAQ:JASN) is the most popular stock in this table. On the other hand, First Trust Strategic High Income Fd II (NYSE:FHY) is the least popular one with only 4 bullish hedge fund positions. Mitek Systems, Inc. (NASDAQ:MITK) 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 JASN might be a better candidate to consider a long position.