NIC Inc. (EGOV): Hedge Funds and Insiders Are Bearish, What Should You Do?

Is NIC Inc. (NASDAQ:EGOV) ready to rally soon? Money managers are selling. The number of long hedge fund positions decreased by 4 lately.

If you’d ask most market participants, hedge funds are viewed as worthless, old investment tools of yesteryear. While there are more than 8000 funds trading today, we hone in on the elite of this club, about 450 funds. It is widely believed that this group oversees most of the hedge fund industry’s total capital, and by tracking their highest performing picks, we have identified a few investment strategies that have historically outpaced Mr. Market. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points per year for a decade in our back tests, and since we’ve began to 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 (see all of our picks from August).

Equally as key, bullish insider trading activity is a second way to break down the investments you’re interested in. There are many stimuli for a bullish insider to get rid of shares of his or her company, but only one, very simple reason why they would behave bullishly. Plenty of academic studies have demonstrated the useful potential of this strategy if investors know where to look (learn more here).

Keeping this in mind, let’s take a glance at the recent action surrounding NIC Inc. (NASDAQ:EGOV).

What does the smart money think about NIC Inc. (NASDAQ:EGOV)?

At Q1’s end, a total of 5 of the hedge funds we track held long positions in this stock, a change of -44% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes substantially.

When looking at the hedgies we track, McKinley Capital Management, managed by Robert B. Gillam, holds the most valuable position in NIC Inc. (NASDAQ:EGOV). McKinley Capital Management has a $6.6 million position in the stock, comprising 0.3% of its 13F portfolio. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which held a $4 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Other peers that hold long positions include D. E. Shaw’s D E Shaw, Cliff Asness’s AQR Capital Management and Mike Vranos’s Ellington.

Judging by the fact that NIC Inc. (NASDAQ:EGOV) has witnessed falling interest from the smart money, logic holds that there was a specific group of fund managers that elected to cut their full holdings in Q1. It’s worth mentioning that Donald Chiboucis’s Columbus Circle Investors dropped the biggest position of the 450+ funds we monitor, worth an estimated $1.4 million in stock., and Israel Englander of Millennium Management was right behind this move, as the fund dropped about $1.1 million worth. These transactions are important to note, as total hedge fund interest was cut by 4 funds in Q1.

What do corporate executives and insiders think about NIC Inc. (NASDAQ:EGOV)?

Insider buying is particularly usable when the company in focus has experienced transactions within the past half-year. Over the latest half-year time period, NIC Inc. (NASDAQ:EGOV) has experienced zero unique insiders purchasing, and 2 insider sales (see the details of insider trades here).

Let’s also review hedge fund and insider activity in other stocks similar to NIC Inc. (NASDAQ:EGOV). These stocks are Jive Software Inc (NASDAQ:JIVE), Manhattan Associates, Inc. (NASDAQ:MANH), Advent Software, Inc. (NASDAQ:ADVS), Progress Software Corporation (NASDAQ:PRGS), and Synchronoss Technologies, Inc. (NASDAQ:SNCR). All of these stocks are in the application software industry and their market caps match EGOV’s market cap.

With the results demonstrated by the aforementioned strategies, retail investors must always watch hedge fund and insider trading activity, and NIC Inc. (NASDAQ:EGOV) is an important part of this process.

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