Is Mitek Systems, Inc. (MITK) Worthy of Your Portfolio?

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 Mitek Systems, Inc. (NASDAQ:MITK).

Mitek Systems saw a decline in popularity among smart money investors tracked by us during the third quarter. At the end of September, 17 funds held shares of the company. At the end of this article we will also compare MITK to other stocks including AxoGen, Inc. (NASDAQ:AXGN), Parker Drilling Company (NYSE:PKD), and PICO Holdings Inc (NASDAQ:PICO) 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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Keeping this in mind, let’s take a look at the latest action surrounding Mitek Systems, Inc. (NASDAQ:MITK).

What does the smart money think about Mitek Systems, Inc. (NASDAQ:MITK)?

At the end of the third quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, compared to 18 funds a quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in MITK heading into this year. With hedgies’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Robert B. Gillam’s McKinley Capital Management has the number one position in Mitek Systems, Inc. (NASDAQ:MITK), worth close to $6.3 million. The second most bullish fund manager is Josh Goldberg’s G2 Investment Partners Management holding a $5.1 million position; 2.3% of its 13F portfolio is allocated to the stock. Some other hedge funds and institutional investors with similar optimism comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Richard Driehaus’ Driehaus Capital, and Cliff Asness’ AQR Capital Management. 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.

Seeing as Mitek Systems, Inc. (NASDAQ:MITK) has experienced declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of hedge funds who sold off their positions entirely last quarter. Intriguingly, Millennium Management, one of the top hedge funds in the world, dumped the biggest investment of all the hedgies tracked by Insider Monkey, valued at an estimated $1 million in stock. Peter Muller’s fund, PDT Partners, also said goodbye to its stock, valued at about $0.4 million.

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Mitek Systems, Inc. (NASDAQ:MITK) but similarly valued. We will take a look at AxoGen, Inc. (NASDAQ:AXGN), Parker Drilling Company (NYSE:PKD), PICO Holdings Inc (NASDAQ:PICO), and RigNet Inc (NASDAQ:RNET). This group of stocks’ market caps are similar to MITK’s market cap.

As you can see these stocks had an average of 10 investors with bullish positions and the average amount invested in these stocks was $28 million. That figure was $31 million in MITK’s case. AxoGen, Inc. (NASDAQ:AXGN) is the most popular stock in this table. On the other hand RigNet Inc (NASDAQ:RNET) is the least popular one with only seven bullish hedge fund positions. Compared to these stocks Mitek Systems, Inc. (NASDAQ:MITK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

Disclosure: None