Red Hat, Inc. (RHT), F5 Networks, Inc. (FFIV): This Metric Says You Are Smart to Sell BMC Software, Inc. (BMC)

Is BMC Software, Inc. (NASDAQ:BMC) a buy, sell, or hold? Hedge funds are taking a pessimistic view. The number of bullish hedge fund positions decreased by 7 recently.

In today’s marketplace, there are tons of methods investors can use to track stocks. Two of the most innovative are hedge fund and insider trading activity. At Insider Monkey, our studies have shown that, historically, those who follow the best picks of the best money managers can outclass the market by a solid margin (see just how much).

Equally as beneficial, positive insider trading sentiment is another way to parse down the stock market universe. There are plenty of reasons for a bullish insider to downsize shares of his or her company, but only one, very simple reason why they would buy. Many empirical studies have demonstrated the valuable potential of this tactic if “monkeys” understand what to do (learn more here).

With these “truths” under our belt, let’s take a look at the latest action surrounding BMC Software, Inc. (NASDAQ:BMC).

What have hedge funds been doing with BMC Software, Inc. (NASDAQ:BMC)?

At year’s end, a total of 19 of the hedge funds we track held long positions in this stock, a change of -27% from the third quarter. With the smart money’s sentiment swirling, there exists a few noteworthy hedge fund managers who were boosting their holdings significantly.

Of the funds we track, Elliott Management, managed by Paul Singer, holds the most valuable position in BMC Software, Inc. (NASDAQ:BMC). Elliott Management has a $530.9 million position in the stock, comprising 16.2% of its 13F portfolio. The second largest stake is held by Larry Robbins of Glenview Capital, with a $206.4 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Other hedge funds that hold long positions include Jim Simons’s Renaissance Technologies, D. E. Shaw’s D E Shaw and Cliff Asness’s AQR Capital Management.

Because BMC Software, Inc. (NASDAQ:BMC) has experienced a declination in interest from hedge fund managers, it’s safe to say that there were a few hedgies that slashed their full holdings in Q4. At the top of the heap, Keith Meister’s Corvex Capital cut the biggest investment of the 450+ funds we watch, worth about $73.1 million in stock., and Jeffrey Altman of Owl Creek Asset Management was right behind this move, as the fund cut about $40.8 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 7 funds in Q4.

How have insiders been trading BMC Software, Inc. (NASDAQ:BMC)?

Insider buying is best served when the company in focus has experienced transactions within the past half-year. Over the last 180-day time period, BMC Software, Inc. (NASDAQ:BMC) has seen zero unique insiders purchasing, and 8 insider sales (see the details of insider trades here).

Let’s check out hedge fund and insider activity in other stocks similar to BMC Software, Inc. (NASDAQ:BMC). These stocks are Workday Inc (NYSE:WDAY), SolarWinds Inc (NYSE:SWI), Red Hat, Inc. (NYSE:RHT), F5 Networks, Inc. (NASDAQ:FFIV), and Nuance Communications Inc. (NASDAQ:NUAN). This group of stocks belong to the application software industry and their market caps match BMC’s market cap.

With the results shown by our tactics, retail investors should always watch hedge fund and insider trading activity, and BMC Software, Inc. (NASDAQ:BMC) is no exception.

Click here to learn why you should track hedge funds