Medidata Solutions Inc (MDSO): Are Hedge Funds Right About This Stock?

Medidata Solutions Inc (NASDAQ:MDSO) was in 11 hedge funds’ portfolio at the end of March. MDSO investors should pay attention to a decrease in hedge fund interest in recent months. There were 13 hedge funds in our database with MDSO holdings at the end of the previous quarter.

To most market participants, hedge funds are viewed as unimportant, old investment vehicles of the past. While there are more than 8000 funds with their doors open today, we look at the moguls of this group, around 450 funds. It is estimated that this group oversees most of all hedge funds’ total capital, and by paying attention to their best stock picks, we have figured out a few investment strategies that have historically outpaced the broader indices. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (check out a sample of our picks).

Just as integral, positive insider trading activity is a second way to parse down the stock market universe. Obviously, there are many motivations for an insider to get rid of shares of his or her company, but only one, very clear reason why they would buy. Several academic studies have demonstrated the market-beating potential of this strategy if “monkeys” know where to look (learn more here).

Now, let’s take a look at the latest action surrounding Medidata Solutions Inc (NASDAQ:MDSO).

What does the smart money think about Medidata Solutions Inc (NASDAQ:MDSO)?

In preparation for this quarter, a total of 11 of the hedge funds we track held long positions in this stock, a change of -15% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings considerably.

According to our comprehensive database, Whale Rock Capital Management, managed by Alex Sacerdote , holds the largest position in Medidata Solutions Inc (NASDAQ:MDSO). Whale Rock Capital Management has a $19.5 million position in the stock, comprising 4.5% of its 13F portfolio. The second largest stake is held by Drew Cupps of Cupps Capital Management, with a $10.2 million position; the fund has 1% of its 13F portfolio invested in the stock. Some other peers with similar optimism include Richard Driehaus’s Driehaus Capital, Spencer M. Waxman’s Shannon River Fund Management and Jim Simons’s Renaissance Technologies.

Due to the fact that Medidata Solutions Inc (NASDAQ:MDSO) has experienced falling interest from hedge fund managers, it’s easy to see that there was a specific group of money managers who were dropping their entire stakes at the end of the first quarter. It’s worth mentioning that SAC Subsidiary’s CR Intrinsic Investors said goodbye to the biggest position of the “upper crust” of funds we track, valued at close to $8.8 million in stock.. Matthew Tewksbury’s fund, Stevens Capital Management, also dropped its stock, about $0.4 million worth. These transactions are interesting, as total hedge fund interest fell by 2 funds at the end of the first quarter.

What do corporate executives and insiders think about Medidata Solutions Inc (NASDAQ:MDSO)?

Insider trading activity, especially when it’s bullish, is most useful when the company in question has seen transactions within the past six months. Over the latest six-month time period, Medidata Solutions Inc (NASDAQ:MDSO) has experienced zero unique insiders purchasing, and 9 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to Medidata Solutions Inc (NASDAQ:MDSO). These stocks are Computer Programs & Systems, Inc. (NASDAQ:CPSI), Allscripts Healthcare Solutions Inc (NASDAQ:MDRX), Quality Systems, Inc. (NASDAQ:QSII), MedAssets, Inc. (NASDAQ:MDAS), and WebMD Health Corp. (NASDAQ:WBMD). This group of stocks belong to the healthcare information services industry and their market caps resemble MDSO’s market cap.

With the results exhibited by our research, retail investors should always watch hedge fund and insider trading activity, and Medidata Solutions Inc (NASDAQ:MDSO) shareholders fit into this picture quite nicely.

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