Is There An Epic Investing Opportunity In EPIQ Systems, Inc. (EPIQ)?

Based on the fact that hedge funds have collectively under-performed the market for several years, it would be easy to assume that their stock picks simply aren’t very good. However, our research shows this not to be the case. In fact, when it comes to their very top picks collectively, they show a strong ability to pick winning stocks. Between November 1, 2014 and October 30 of this year, less than 49% of the stocks in the S&P 500 beat the market. However, hedge funds’ top 30 stock picks from the index had a much higher success rate than this, at 63%. The returns from these 30 stocks also easily bested the broader market, at 9.5% compared to 5.2%, despite there being a few duds in there like Micron and Anadarko (even their collective wisdom isn’t perfect). The results show that there is plenty of merit to imitating the collective wisdom of top investors.

Is EPIQ Systems, Inc. (NASDAQ:EPIQ) a buy, sell, or hold? Money managers are selling. The number of long hedge fund positions decreased by 1 recently. EPIQ Systems, Inc. was in 14 hedge funds’ portfolios at the end of the third quarter of 2015. There were 15 hedge funds in our database with EPIQ Systems, Inc. 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 Boot Barn Holdings Inc (NYSE:BOOT), Hanger Inc (NYSE:HGR), and PennantPark Investment Corp. (NASDAQ:PNNT) to gather more data points.

To most market participants, hedge funds are assumed to be underperforming, old financial tools of years past. While there are greater than 8,000 funds with their doors open at present, our experts look at the aristocrats of this club, around 700 funds. Most estimates calculate that this group of people orchestrate the lion’s share of the hedge fund industry’s total asset base, and by watching their top picks, Insider Monkey has discovered a few investment strategies that have historically outrun the market. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points per year for a decade in their back tests.

With all of this in mind, we’re going to take a peek at the fresh action encompassing EPIQ Systems, Inc. (NASDAQ:EPIQ).

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

Heading into Q4, a total of 14 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 7% decline from the second quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, P2 Capital Partners, managed by Claus Moller, holds the number one position in EPIQ Systems, Inc. (NASDAQ:EPIQ). P2 Capital Partners has a $78.8 million position in the stock, comprising 15.3% of its 13F portfolio. On P2 Capital Partners’ heels is Richard McGuire’s Marcato Capital Management, with a $3.6 million position; 0.2% of its 13F portfolio is allocated to the stock. Remaining hedge funds and institutional investors that hold long positions contain Renaissance Technologies, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Marc Majzner’s Clearline Capital.

Due to the fact that EPIQ Systems, Inc. (NASDAQ:EPIQ) has experienced bearish sentiment from the entirety of the hedge funds we track, logic holds that there were a few money managers that elected to cut their full holdings last quarter. It’s worth mentioning that Glenn Russell Dubin’s Highbridge Capital Management cut the largest position of the 700 funds tracked by Insider Monkey, worth an estimated $2.9 million in stock. Andrew Grossman and Michael Levitt’s fund, LG Capital Management, also cut its stock, about $2.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 fund during the last quarter.

Let’s now review hedge fund activity in other stocks similar to EPIQ Systems, Inc. (NASDAQ:EPIQ). These stocks are Boot Barn Holdings Inc (NYSE:BOOT), Hanger Inc (NYSE:HGR), PennantPark Investment Corp. (NASDAQ:PNNT), and QAD Inc. (NASDAQ:QADA). All of these stocks’ market caps resemble EPIQ Systems, Inc.’s market cap.

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 $28 million. That figure was $86 million in EPIQ’s case. Hanger Inc (NYSE:HGR) is the most popular stock in this table. On the other hand Boot Barn Holdings Inc (NYSE:BOOT) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks EPIQ Systems, Inc. (NASDAQ:EPIQ) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers and have more money invested in it, it may be a good idea to analyze it in detail and potentially include it in your portfolio.