Is ServiceNow Inc (NOW) Going to Burn These Hedge Funds?

ServiceNow Inc (NYSE:NOW) shareholders have witnessed a decrease in hedge fund sentiment of late.

In the 21st century investor’s toolkit, there are plenty of indicators shareholders can use to track publicly traded companies. A duo of the most useful are hedge fund and insider trading interest. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the elite investment managers can outperform their index-focused peers by a significant margin (see just how much).

Just as beneficial, optimistic insider trading activity is a second way to break down the marketplace. There are a variety of stimuli for a corporate insider to sell shares of his or her company, but just one, very simple reason why they would initiate a purchase. Several academic studies have demonstrated the useful potential of this strategy if investors understand where to look (learn more here).

Keeping this in mind, it’s important to take a gander at the recent action surrounding ServiceNow Inc (NYSE:NOW).

Hedge fund activity in ServiceNow Inc (NYSE:NOW)

At Q1’s end, a total of 18 of the hedge funds we track held long positions in this stock, a change of 0% from the previous quarter. With the smart money’s capital changing hands, there exists a few key hedge fund managers who were increasing their stakes meaningfully.

According to our comprehensive database, Christopher Lord’s Criterion Capital had the most valuable position in ServiceNow Inc (NYSE:NOW), worth close to $117.8 million, comprising 4.4% of its total 13F portfolio. The second largest stake is held by Columbus Circle Investors, managed by Donald Chiboucis, which held a $51.7 million position; 0.4% of its 13F portfolio is allocated to the stock. Remaining hedge funds that are bullish include David Stemerman’s Conatus Capital Management, Panayotis Takis Sparaggis’s Alkeon Capital Management and Noam Gottesman’s GLG Partners.

Due to the fact that ServiceNow Inc (NYSE:NOW) has faced a declination in interest from the entirety of the hedge funds we track, we can see that there were a few money managers that decided to sell off their positions entirely last quarter. At the top of the heap, Christian Leone’s Luxor Capital Group cut the largest position of all the hedgies we monitor, valued at about $10.1 million in stock., and D. E. Shaw of D E Shaw was right behind this move, as the fund cut about $7 million worth. These moves are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

What have insiders been doing with ServiceNow Inc (NYSE:NOW)?

Insider trading activity, especially when it’s bullish, is at its handiest when the company in focus has seen transactions within the past half-year. Over the latest six-month time period, ServiceNow Inc (NYSE:NOW) has seen zero unique insiders buying, and 11 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to ServiceNow Inc (NYSE:NOW). These stocks are Syntel, Inc. (NASDAQ:SYNT), Computer Sciences Corporation (NYSE:CSC), Rackspace Hosting, Inc. (NYSE:RAX), Gartner Inc (NYSE:IT), and NCR Corporation (NYSE:NCR). This group of stocks are in the information technology services industry and their market caps resemble NOW’s market cap.

With the results shown by our strategies, everyday investors should always monitor hedge fund and insider trading sentiment, and ServiceNow Inc (NYSE:NOW) applies perfectly to this mantra.

Click here to learn why you should track hedge funds