Is Polycom Inc (PLCM) a Good Stock To Buy?

Between June 25 and October 30th the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by more than 14 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor, and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Polycom Inc (NASDAQ:PLCM) and see how the stock is affected by the recent hedge fund activity.

Is Polycom Inc (NASDAQ:PLCM) a buy, sell, or hold? Prominent investors are reducing their bets on the stock. The number of long hedge fund positions retreated by 6 recently. PLCM was in 18 hedge funds’ portfolios at the end of the third quarter of 2015. There were 24 hedge funds in our database with PLCM 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 Evertec Inc (NYSE:EVTC), Cvent Inc (NYSE:CVT), and Mobile Mini Inc (NASDAQ:MINI) to gather more data points.

In the financial world there are many indicators stock market investors employ to value publicly traded companies. Two of the most underrated indicators are hedge fund and insider trading indicators. Our experts have shown that, historically, those who follow the best picks of the elite hedge fund managers can outclass the market by a solid amount (see the details here).

Keeping this in mind, let’s take a gander at the new action surrounding Polycom Inc (NASDAQ:PLCM).

Hedge fund activity in Polycom Inc (NASDAQ:PLCM)

At Q3’s end, a total of 18 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -25% from one quarter earlier. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, George Soros’ Soros Fund Management has the largest position in Polycom Inc (NASDAQ:PLCM), worth close to $112.5 million, comprising 1.7% of its total 13F portfolio. On Soros Fund Management’s heels is Elliott Management, managed by Paul Singer, which holds a $76.7 million position; 1.5% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions consist of Joel Greenblatt’s Gotham Asset Management, Cliff Asness’ AQR Capital Management and D E Shaw.

Since Polycom Inc (NASDAQ:PLCM) has experienced bearish sentiment from the smart money, it’s easy to see that there was a specific group of money managers that decided to sell off their entire stakes in the third quarter. At the top of the heap, Ken Griffin’s Citadel Investment Group cut the biggest investment of the 700 funds watched by Insider Monkey, valued at an estimated $2.8 million in stock, and Glenn Russell Dubin’s Highbridge Capital Management was right behind this move, as the fund dumped about $2.1 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds in the third quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Polycom Inc (NASDAQ:PLCM) but similarly valued. These stocks are Evertec Inc (NYSE:EVTC), Cvent Inc (NYSE:CVT), Mobile Mini Inc (NASDAQ:MINI), and RBC Bearings Incorporated (NASDAQ:ROLL). This group of stocks’ market valuations are similar to PLCM’s market valuation.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $310 million in PLCM’s case. Evertec Inc (NYSE:EVTC) is the most popular stock in this table. On the other hand RBC Bearings Incorporated (NASDAQ:ROLL) is the least popular one with only 8 bullish hedge fund positions. Polycom Inc (NASDAQ:PLCM) is tied with EVTC as the most popular stock in this group. This is a positive signal that makes PLCM worth a closer look.